Dominick Salvatore

The Dollarization Debate

This book takes a global approach, with an emphasis on North and Latin America respectfully, by discussing one of todays most controversial topics in business; Dollarization. With the collapse of the former Soviet Union, and the formation of the Euro in Europe, many countries and debating whether or not a common currency is in their best interest. This intriguing volume brings together the leading participants in the current dollarization debates. Many advocate the notion of a common currency, while others feel that in doing so will create financial costs for all that take part, with the severity varying from country to country. Available in OSO: http://www.oxfordscholarship.com/oso/public/content/economicsfinance/0195155351/toc.html

Globalization, Growth and Poverty

Abstract The paper examines the change in the income distribution of developed and developing countries over the recent period of globalization from 1980 to the present. The change in the income distribution of developing countries is also measured for those developing countries that globalized and those that did not. The paper finds that in terms of the three major measures of central tendency, the real personal income ratios between developed and developing countries have been substantially reduced during the 1980-2005 period of rapid globalization, especially at the mode, where the most severe poverty lies.

The Euro, the Dollar, and the International Monetary System

On January 1, 1999, the euro came into existence as the single currency of 11 of the 15 member countries of the European Union (Austria, Belgium, Germany, Finland, France, Ireland, Italy, Luxembourg, The Netherlands, Spain, and Portugal). Britain, Sweden, and Denmark chose not to participate, and Greece was not allowed in because it did not satisfy any of the Maastricht conditions for admission. It is likely, however, that all four nations will join by the year 2002 when the euro is to completely replace national currencies and become the sole currency of the European Union. This is the first time that a group of sovereign nations voluntarily give up their moneys in favor of a common currency, and ranks as one of the most important events of postwar monetary history. In my presentation, I will begin by examining the position of the dollar as the undisputed international and vehicle currency at the end of 1998, at the eve of the introduction of the euro. Then I will discuss the reasons the euro became the second most important international currency from its very inception. Subsequently, I will examine ways to deal with possible damaging exchange rate misalignments between the euro and the dollar, the yen, and other important international currencies, as well as the experience of the euro since its introduction.

Import penetration, exchange rates, and protectionism in the United States

Abstract This study examines the causes and effects of protectionist pressure and actual protectionism in the form of escape clause petitions in the United States in the period of the different exchange-rate regimes that prevailed during the postwar period. A simultaneous equations model is constructed for import penetration, the number of escape clause petitions filed, and their ratio of success. The model is tested using U.S. data from 1948 to 1985 and validated by dynamic simulation. The results are then compared with the those of the few other empirical studies that examined the causes and effects of nontariff trade protection in the United States.

Central European Banks and Stock Exchanges: Capacity-building and Institutional Development

This paper analyses capacity building and institutional development in the banking and capital market sectors of formerly planned economies in Central and Eastern Europe. While the existing literature mostly addresses the specific situation of banks and capital markets in a particular country or for a few countries of the region only, this paper identifies common institutional and structural problems of all 10 Central European applicant countries for EU membership. Given the strong tendencies towards imprudent banking, the small size of the financial markets, asymmetric information, inadequate capitalization and insufficient supervision, privatization of the large former state owned banks may require strong equity involvement of foreign banks and international institutions like the European Bank for Reconstruction and Development (EBRD), which reduce the risk for foreign investors by providing guarantees and securing more reliable banking policies of the respective governments.

Forecasting Financial Crises in Emerging Market Economies

This article identifies six fundamental indicators that might predict a financial crisis similar to the one that affected the emerging markets of Southeast Asia. Our empirical analysis shows that the 1997 Asian crisis could have been predicted. Probit estimation reveals that a small number of common indicators can forecast a financial crisis well. The estimation gives estimates that are robust to either cross-section or panel data. We suggest an aggregate indicator that combines all the individual indicators and calculates the optimal thresholds for the indicators. This aggregate indicator has similar predictive properties and reduces the calculations to determine the probability of crisis.

The Global Economic Consequences of the Uruguay Round

This paper examines the provisions of the recently completed Uruguay Round and evaluates the qualitative and quantitative effects of the Round on major countries and regions of the world. The implications of the Uruguay Round are measured using the G-cubed multicountry model. This model captures macroeconomic and sectoral linkages within the global economy. This study differs from other studies in that it considers the dynamic adjustment path, the impact of expectations formation, and the sectoral as well as macroeconomic consequences of the Round. The results are compared with other studies of the Uruguay Round. Ignoring major changes in productivity induced by the Round, it is found that the gains to the world economy are likely to be around

A simultaneous equations model of internal migration with dynamic policy simulations and forecasting: Italy 1952-1976

200 billion (1990) per year by the year 2000. The distribution of the gains across regions from the Round differ from other studies because of the adjustment of international capital flows. Private capital flows to regions that undertake the most extensive liberalization initially worsen their trade positions. In regions that liberalize less and experience a capital outflow, the production gains tends to be less than conventional studies find. The adjustment of private capital has important implications for exchange rates, and therefore for the adjustment of the international trading system over the decade of the implementation of the Round.

The Economic Performance of Small Versus Large Nations

Abstract The purpose of this study is to determine, with a dynamic simultaneous equations model, the relative importance of the most significant socioeconomic forces leading to the large-scale labor migration from the South to the North of Italy from 1952 to 1976, and to analyze its implications for the past and prospective development of the South. The model is estimated by Full Information Maximum Likelihood, validated by dynamic simulation, stressing dynamic policy simulations, and also presenting the results of some forecasting.

China's Financial Markets in the Global Context

The number of nations has quadrupled during the past 50 years, from 51 in 1945 to 210 in 1997. Globalization and the reduction of trade barriers have sharply reduced the disadvantages of smallness and encouraged the proliferation of new nations during the past decades. And there is no end in sight — some political scientists predict that the number of nations may double again during the next two or three decades. In this paper, we begin by classifying nations into large and small nations and then we examine the economic performance of small nations in relation to large nations over the past 12 years (1985–1997). Data availability and the greater relevance of the experience of the last dozen years make it the most feasible and useful period to study.