Showing papers on "Purchasing power published in 1988"

The Conundrum of Successful Credit Projects in Floundering Rural Financial Markets

Abstract: Many governments use credit projects to foster agricultural development, and donors spend billions of dollars supporting these activities in low income countries (LICs). Most of these activities are justified by the purported impact that loans have on ultimate borrowers, for example, credit demands filled, additional crops produced, changes in modern inputs used, and borrowers' incomes increased. Most project evaluations report favorable impacts that, in turn, stimulate donors and governments to spend more money on agricultural credit. These favorable evaluations have prompted policymakers to conclude that rural financial markets are strengthened by most credit projects. At the same time, other researchers have evaluated rural financial markets in countries with successful credit projects and have found mounting problems. They report on markets that lose substantial portions of the purchasing power of their loan portfolios to ravages of default or inflation, concentrations of cheap loans in the hands of the wealthy, political meddling in lending, systems that offer few savings opportunities, large transaction costs for lenders and borrowers, lenders who are addicted to outside funds for their sustenance, and credit institutions that sporadically implode or self-destruct.' These reports of healthy parts but infirm wholes present a conundrum. How can the major parts of the rural financial system involved in donor and government projects be doing well while the system as a whole is doing poorly? Are these projects islands of tranquility in otherwise stormy seas? Or is one of these two approaches to evaluation giving an erroneous picture? Unfortunately, few credit project evaluations are published in journals or books, although a large number of these studies have been done. Typically, evaluation results are buried in unpublished reports or in graduate student theses. While millions of dollars have been spent

Backing Theories and the Currencies of Eighteenth-Century America: A Comment

Abstract: Recently, a newly fashionable theory-the backing theory-has been used to explain the purchasing power of paper money during a number of historical episodes. The terminology is unfortunate, because the theory is different from traditional theories of backing. The backing referred to by the new theory consists of government tax revenues plus other government assets, not the traditional commodity backing. Accordingly, the new backing theory holds that the purchasing power of money is determined by government fiscal policy.' The new backing theorists claim that the price level will not be affected by changes in the quantity of money provided appropriate fiscal policies are followed. The theory has been used by Bruce Smith and Elmus Wicker to explain the purchasing power of American colonial currencies, and by Charles Calomiris, in a recent article in this JOURNAL, to explain the purchasing power of the continental currency issued during the American Revolution.2 The purpose of this comment is to address a new twist Calomiris has given to the backing theory, to review the evidence he presents, and to show some points of similarity between the colonial and revolutionary episodes. My position is that the backing theory has little or no explanatory value when applied to either the American colonial or revolutionary periods.3 Smith, Wicker, and Calomiris conclude that changes in prices were largely unrelated to changes in the money supply, but they overlook two important institutional facts. First, the measures of the money supply used by all three are seriously flawed. In the case of colonial America, the money supply data do not accurately measure even the amount of paper money in circulation

Gender Differences: The Role of Endogenous Preferences and Collective Action

Abstract: For the last twenty-five years, our society has scrutinized relationships between women and men to an unprecedented degree. In this discussion-at once a positive description of behavior and a normative evaluation of family life-neoclassical economics has contributed important insights concerning the connection between the labor market and the family. However, the neoclassical inquiry has proceeded in remarkable isolation from interdisciplinary and popular debates which have focused on the issue of power relations between men and women-a stance which ultimately restricts the explanatory scope of the analysis. The invisibility of power is particularly characteristic of the "trade" metaphor for marriage (Gary Becker, 1981; myself, 1987; Nancy Folbre, 1986). The exclusive focus on trade reduces social power to mere purchasing power, which is exercised over technical resources or consumption goods, not people. The transaction cost analysis of the family (Robert Pollak, 1985, and Paula England and George Farkas, 1986) has a richer conception of power relations between family members who are locked in bilateral monopolies, but here power seems to be little more than a phenomenon endemic to longterm personal relationships. In this paper I advance two different propositions concerning the mechanisms and consequences of power between men and women, and use them to consider some concrete questions about the household. First, the mechanisms of power include collective action (a point argued in other contexts by Douglass North, 1981; Amartya Sen, 1977; Albert Hirschman, 1985; Samuel Bowles and Herbert Gintis, 1986; and Heidi Hartmann, 1976). Second, the consequences of power include the social construction of gender. A discriminatory economic system produces men and women whose socially differentiated capacities for performing and enjoying various types of work are much more distinct than their innate endowments. In other words, preferences and productive abilities are endogenous. (In this paper, I borrow from the work of Hirschman, Sen, Gintis, 1972, and many feminist authors such as Alison Jaggar, 1983, to explore the endogeneity of preferences.) I use two questions to motivate consideration of these claims. The first concerns the informal marriage contract: why has men's participation in household labor and childcare been so slow to change as women's market income has increased? Time-budget studies generally show that men's household labor is not very responsive to women's market labor. At most, men took on about two more hours of household responsibilities per week in the 1970's when women's wage labor increased dramatically (Ellen Fried and Susan Settergren, 1986; C. Russell Hill and Frank Stafford, 1980; Hartmann, 1981). The second question concerns the formal marriage contract: why are there so many retDiscussants: Gary S. Becker, University of Chicago; Paula England, University of Texas-Dallas.

The Purchasing Power of Money and Nominal Interest Rates: A Re-Examination

Abstract: While it has been known for some time that, under uncertainty, the original version of the Fisher hypothesis is not precisely correct, empirical researchers have largely ignored this fact. Such an omission has possibly resulted in erroneous conclusions concerning other hypotheses; most notably the impact of prices on the real economy. This paper clarifies some of the previous interpretations of the existing empirical literature and provides a theoretical version of the relation between prices and interest rates. Empirical tests based on both the Livingston survey data and data from time-series forecasting models provide support for the Fisher effect and the hypothesis that only covariance risk is priced in the Treasury bill market. ONE OF THE BASIC hypotheses concerning rationality in financial markets is based on statements generally attributed to Fisher [18]. Fisher argued that the nominal or money rate of return on an asset should compensate an investor for his or her required real rate of return and changes in the purchasing power of money. For the uncertainty case, Fisher replaced known purchasing power changes with the expected inflation rate. Whereas the Fisher relationship under certainty is well defined, his basic theorem under uncertainty is not precise. As Fama [15] has argued, it is changes in the purchasing power of money, not the inflation rate, that should concern investors. Under uncertainty, the expected value of one is not, by Jensen's inequality, the inverse of the expected value of the other. Moreover, Fama and Farber [16], Grauer and Litzenberger [20], and Benninga and Protopapadakis [3] have shown that, when investors are risk averse, the Fisher relationship will generally not hold, even after adjustment has been made for the distinction between purchasing power changes and the inflation rate. In particular, these authors show that an adjustment must be made for the fact that the real rate of return on nominal bonds is random. While these issues have been discussed in the theoretical literature, they have largely been ignored in the empirical work on this topic. Given the fact that nominal rates do not seem to adjust as rapidly to price changes as Fisher hypothesized, numerous empirical researchers have expanded the basic Fisher model in an attempt to explain this empirical anomaly. These extensions include the incorporation of (a) inflation rate variability and the growth in real output

Grain Pricing: A Key Link in Chinese Economic Policy

Abstract: In China, as in other countries, grain prices act as a link between consumers and producers and across economic sectors. Higher grain prices can raise farm incomes, but they reduce the purchasing power of consumers. By encouraging production and discouraging consumption, they can also reduce the need for imports. In addition, grain prices can alter the flow of resources between industry and agriculture. Grain pricing thus influences the rate and composition of economic growth, the level and distribution of income, economic stability, and national selfreliance. Consequently, implicit in grain price policy are choices among the national economic objectives of growth, equity, stability, and national security. An examination of grain pricing in China reveals an additional linkage. In China a close relationship exists between food pricing, including grain pricing, and public finance. In China's socialized economy, the profits and losses of industrial and commercial enterprises have, at least until recently, entered directly into the state budget. Through its effects on enterprise profitability, then, agricultural pricing influences state revenues and expenditures. China's price policies, by keeping the prices of agricultural products low relative to industrial products, have enhanced industrial profitability and thus benefited state coffers. At the

On Aggregation Methods of Purchasing Power Parities

Abstract: The development of purchasing power parities as converters of national accounts aggregates to comparable volume figures is important for international economic comparisons. This study is primarily concerned with the aggregation of price relativities to basic heading level: that is, the level below which there are no expenditure weights available across all of a given group of countries. Eight possible methods of aggregation to basic heading level are identified and appropriate summary statistics developed to assist in the subsequent practical investigation of these methods. This is undertaken using price data for 37 basic headings in ten OECD countries ...

Purchasing power: business and health policy change in Massachusetts.

Abstract: As in many states around the country, health care costs in Massachusetts had risen to an unprecedented proportion of the state budget by the early 1980s. State health policymakers realized that dramatic changes were needed in the political process to break provider control over health policy decisions. This paper presents a case study of policy change in Massachusetts between 1982 and 1988. State officials formulated a strategy to mobilize corporate interests, which were already awakening to the problems of high health care costs, as a countervailing power to the political monopoly of provider interests. Once mobilized, business interests became organized politically and even became dominant at times, controlling both the policy agenda and its process. Ultimately, business came to be viewed as a permanent part of the coalitions and commissions that helped formulate state health policy. Although initially allied with provider interests, business eventually forged a stronger alliance with the state, an alliance that has the potential to force structural change in health care politics in Massachusetts for years to come. The paper raises questions about the consequences of such alliances between public and private power for both the content and the process of health policymaking at the state level.

Zambia under the imf regime

Abstract: THE ZAMBIAN ECONOMY is in a dismal situation. Up to the mid-1970 s Zambia had one of the most prosperous economies in Sub-Saharan Africa, based on copper mining which contributed more than 90 per cent of merchandise exports. Since real copper prices started to decline rapidly in 1975,1 conditions have been worsening continually. A development like this is not at all unique; the economic plight is shared by a great number of developing countries, which are notably concentrated in black Africa. Nor is Zambia worst off in every respect. It is only for the development of the terms-of-trade that Zambia's recent experience is unmatched by any other country in the world. The terms-of-trade index, which indicates the relationship of the purchasing power of one unit of the country's exports against her imports, dropped by 70 per cent from 1974 to 1985. But for every other economic indicator there seem to be countries against which even Zambia's weak performance can be compared favourably. However, taken collectively, the economic trends together fit into a syndrome that is most typical of a small primary exporting developing country in today's world environment. 2 A collapse in the price of primary exports together with rising prices for imports leads to a drastic reduction in the availability of imports. Since local production is heavily dependent on imported inputs, capacity utilization and value-added are seriously affected. Sinking profits and a shrinking tax-base tend to restrain capital maintenance and the rate of investment in private and public capital, thereby reducing efficiency still further. Lack of private and public savings, together with the severe trade balance deficit, induce increasing levels of external borrowing which, by the resulting burden of debt servicing, act as a further drain on domestic saving and foreign exchange earnings. The country thus becomes trapped in a vicious circle. In the case of Zambia the protracted crisis revealed inherent weaknesses in the economic and social structure which, during the prosperous years, were veiled by seemingly plentiful material resources and positive growth rates

How community drug sales schemes may succeed.

Abstract: Almost all of the problems that communities encounter when setting up drug sales schemes can be anticipated by giving careful attention to political social economic managerial and financial factors. Problems are often attributable to the inability of governments to provide drugs and to the private sectors unwillingness to sell or distribute them where purchasing power is low. The 1st step is to define the problems of drug supply and their causes. Objectives then become clear. The community has to decide what type of payment it will institute. If prices are set above the peoples ability to pay the scheme will not succeed; if they are set too low costs will not be fully recovered. Once the type of fee has been chosen a number of other decisions have to be taken including selecting drugs and estimating needs obtaining start-up money finding a reliable source of drugs cost-efficient transportation establishing a community drug depot and establishing price-setting. The introduction of community-based drug sales schemes may result in gains or losses for various interests which should be identified at the outset. If the staff share in the risks of the scheme they will have an incentive to work for its survival.

Contingency pricing for improved profit performance

Abstract: During the past decade few areas of marketing strategy have received more attention than the establishment and implementation of pricing strategies. This emphasis has been due in part to the erosion of purchasing power during the past ten years. Both individual household income and real company profits (profits discounted for the impact of inflation) suffered declines which have only recently been turned around.

The role of the pacific region in the World Economy of the future

Abstract: Gives an overview and analysis of the role of the Pacific region in the world economy stressing the ongoing shift of growth potential and purchasing power. Japan's surplus is discussed as a tool to stimulate economic growth in the world. Trends in Pacific cooperation are given.

Is Foreign Aid an Obstruction to Democracy and Development in the Third World

Abstract: Aid was first initiated by the United States during the early Fifties. It was supposed to help the efforts of the peoples of underdeveloped countries to develop their resources and improve their living and working conditions by encouraging the exchange of technical knowledge and skills and the flow of investment capital to countries which provide conditions under which the technical assistance and capital can effectively contribute to raising standards of living, creating new sources of wealth, increasing productivity and expanding purchasing power.' Furthermore, it was initially meant to prove the superiority of the 'Western' democratic order over Communism. Although the genesis of aid sprang from the grand design to help the Third World countries develop their economies along liberal and democratic lines, the flow of aid in quite substantial amounts, however, began to influence the mode of development in such a manner that aid became an instrument of serving more the foreign policy considerations of the donors rather than meeting the genuine development requirements of the recipient nations. This change in policy slowly but steadily forced many a young country to fall into the aid trap and by the time they discover• ed their plight they had already become 'client' states. This was indeed not a pleasant outcome of the whole exercise in 'aidmanship'.

Deposit accounts for monograph acquisitions: a budget‐stretching technique

Abstract: In today's age of budget pressures and ever‐increasing costs for monographs and continuations, we all look for methods to improve our purchasing power. Perhaps a deposit prepayment account with a book vendor would help meet your needs.

Oil and the North-South Terms of Trade

Abstract: The terms of trade between manufactures and primary commodities have been a major topic of research at least since the inter— war period. Keynes’s worries regarding the instability of commodity prices (see his collected works, Vol. XXVII) were supplemented, in the post—Second World War concern with development, with worries about a secular decline in the purchasing power of commodities vis—a—vis manufactures. The classic work here is of course that of Prebisch (1950) and Singer (1950), but the debate about trends in these terms of trade is as lively as ever (see, for example, Spraos (1980)). In the 1970s the case for a New International Economic Order saw the manufactures/ commodities terms of trade problem as being a problem of the North-South terms of trade (Brandt (1980)). But the oil price shocks of the mid and late 1970s, after the initial euphoria about ‘commodity power’ had subsided, forced a distinction between the oil producers and the (poorer) countries of the world selling other commodities. The ‘South’ is of course defined to exclude the oil rich countries, and is seen as having suffered particularly badly from the oil price hikes. A new dimension is thus added to the determination of the North—South terms of trade — the price of oil. The recent dramatic falls in the price of oil further emphasise the need for such an analysis.