Ruth Arad

Embargo threat, learning and departure from comparative advantage

Abstract This paper extends the current analysis of trade embargo threats, initiated by Bhagwati and Srinivasan, Mayer, and others using general-equilibrium analysis, to a situation where there is the possibility of lowering the future cost of production of the potentially embargoed good as a result of learning-by-doing.

Peacemaking and Vested Interests: International Economic Transactions

Two neighboring countries which have been at war with each other decide to make peace. Their governments undertake to allow their citizens to engage in trade and other economic transactions. This article considers the impact of different bilateral transactions on the welfare of producers and consumers in the two countries and hence on their attitude toward peace. Distinction is made between the effects of different kinds of transactions, including those involving existing and new trade as well as existing and new productions. Special reference is made to the recent Egyptian-Israeli peace effort.

Determination of trade flows and choice of trade partners: Reconciling the Heckscher-Ohlin and the Burenstam Linder models of international trade

ZusammenfassungDie Bestimmung der Handelsströme und Auswahl der Handelspartner: Wie man die Au\enhandelsmodelle von Heckscher-Ohlin und von Burenstam Linder in Einklang bringt. — In der Au\enhandelsliteratur werden zwei AnsÄtze zur Bestimmung der komparativen Vorteile unterschieden: (i) das Heckscher-Ohlin-Modell, das die relative Verfügbarkeit der Produktionsfaktoren als die ent-scheidende Determinante der Handelsbeziehungen ansieht; und (ii) das Burenstam Linder-Modell, das untersucht, wie sich gleichartige PrÄferenzen der Konsumenten in der Nachfrage und im internationalen Handel niederschlagen. Dieser Artikel verbindet beide AnsÄtze in einem einzigen Modell, in dem jeder der beiden AnsÄtze nur einen Spezialfall darstellt. In dem Aufsatz wird die Bedeutung des gemeinsamen Modells für die Handelsströme, die Konsummöglichkeiten und die Relation zwischen dem Au\enhandel und der Grö\e einer Volkswirtschaft analysiert. Im empirischen Teil wird demonstriert, wie nützlich das Modell bei der Vorhersage des Handels mit unterschiedlichen Produktgruppen ist.RésuméLa détermination des flux d’échanges et le choix des partenaires com-merciaux: La réconciliation des modèles de l’échange international de Heckscher-Ohlin et de Burenstam Linder. — La littérature sur les échanges internationaux distingue entre deux approches à la détermination de l’avantage comparatif: (i) le modèle de Heckscher-Ohlin qui regarde l’abondance relative des facteurs de production comme déterminant principal des relations commerciales; (ii) le modèle de Burenstam Linder qui examine la similarité des préférences des consommateurs comme elle est reflétée sur la situation de demande et les effets sur le commerce extérieur. Cet article incorpore les deux approches dans un seul modèle dans lequel chaque approche constitue un cas spécial. L’article examine les implications du modèle unifié pour les relations commerciales, les possibilités de consommation et le rapport entre les échanges internationaux et la dimension de l’économie. La section empirique démontre l’utilité du modèle pour prédire les relations commerciales des différents groupes des biens.ResumenDetermination de los flujos comerciales y la elección de los socios comerciales: Reconciliando los modelos de comercio international de Heckscher-Ohlin y Burenstam Linder. — La literatura del comercio internacional distingue entre dos planteamientos para la determinatión de las ventajas comparativas: (i) el modelo de Heckscher-Ohlin, que considera la abundancia relativa de factores de production como el determinante más importante para el patrón de comercio; (ii) el modelo de Burenstam Linder, que examina las similitudes en los gustos re-flejados en el acondicionamiento de la demanda y su impacto sobre el comercio. En este artículo se incorporan los dos planteamientos dentro de un modelo Único en el que cada uno constituye un caso especial. El artículo examina las implicaciones del modelo unificado para los patrones de comercio, posibilidades de consumo y la relatión del comercio con respecto al tamaño del país. La parte empírica del artículo demuestra la utilidad del modelo para predecir patrones de comercio de distintos grupos de productos.

A Design Model for Allocating Interrelated Land-Use Activities in Discrete Space

A fundamental problem confronting architects and land-use planners is allocating interrelated activities to sites in order to achieve a set of predetermined goals. In some planning situations, such as the design of new towns, all activities can be initially manipulated under very few constraints, and a large number of alternative plans are possible. The generation and selection of the ‘best’ plan is further complicated when we consider the interrelationships between the locational activities. This paper proposes a multistage planning approach capable of producing and selecting ‘best’ allocation plans. The structural features of the model are discussed and an optimization procedure is presented. The latter combines the exchange-elements allocation technique with the Newton-penalty-function optimization method. The models proficiency as a planning tool is examined by use of data drawn from a real-world case study.

Currency-related risk and risk premium in the world's currency market

Abstract The foreign exchange market has become a major arena for investment activity for both corporate and individual investors. Intensive and widespread international investment activity makes the empirical estimation of exchange risk a very topical subject. In this connection, the classic controversy between Hicks and Telser assumes new relevance. In this paper, exchange risk is estimated in the context of the systematic-risk framework. The estimation is performed for three major floating currencies: the English pound, the Swiss franc, and the Deutsche mark, over a four-year period. The results suggest that although the total risk (measured by the variance) is high, the systematic risk is close to zero. This result provides an explanation for the apparent inconsistency between the Hicks-Keynes hypothesis which indicates the existence of a positive risk premium in the forward exchange market and the empirical evidence of a zero risk premium.

Potential Trade between Egypt and Israel

ZusammenfassungAu\enhandelspotential zwischen Ägypten und Israel. — Der Aufsatz untersucht die Zusammensetzung und den Umfang des potentiellen Handels zwischen Ägypten und Israel. In der Untersuchung wird zwischen den kurzfristigen und den langfristigen Aspekten unterschieden, wobei als kurzfristig die Periode angesehen wird, in der das Produktionsmuster beider LÄnder nicht geÄndert werden kann, und als langfristig die Zeit, in der sowohl Produktion als auch Konsum den neuen Bedingungen der Nachkriegszeit angepa\t werden können. Um die Industrien zu identifizieren, die langfristig den Handel zwischen den beiden LÄndern tragen können, wird ein ökonometrisches Modell vom «Linnemann»-Typ verwendet.RésuméLe commerce extérieur potentiel entre l’Egypte et l’IsraËl. — Cet article examine la composition et le volume du commerce extérieur potentiel entre l’Egypte et l’IsraËl. L’analyse distingue entre le court terme — la période pendant laquelle les structures de la production dans les deux pays ne peuvent pas Être changées — et le long terme, c.-á.-d. la période pendant laquelle la production aussi bien que la consommation peut Être adaptée aux conditions nouvelles d’aprèsguerre. Un modèle économétrique du type «Linnemann» est appliqué pour identifier les industries qui sont des candidats pour le commerce extérieur entre les deux pays á long terme.ResumenComercio potencial entre Egipto e Israel. — El articulo examina la composition y volÚmen del comercio potencial entre Egipto e Israel. El análisis distingue entre el corto plazo — el perlodo durante el cual los patrones de production en los dos países no pueden ser alterados — y el largo plazo — cuando tanto la production como el consumo pueden adaptarse a las condiciones nuevas de postguerra. Se utiliza un modelo econométrico del tipo «Linnemann» para identificar industrias que son candidatas para el comercio entre los dos países en el largo plazo.

Exchange risk and unanticipated changes in exchange rates

Abstract In this paper exchange risk is defined as the unanticipated part of the future changes in the exchange rates of a given currency. The unanticipated component in the fluctuations of a given currency is identified on the basis of a dynamic equilibrium process which determines the anticipated changes in the future exchange rates. Following the basic definition, a hypothetical process of dynamic adjustment and an empirical illustration of a possible estimation are discussed.

Interdependence between Past Belligerents

When recent belligerents seek to develop bilateral relations, the point of departure is zero. Changes in the nature and extent of their relations are; not at the margin; they are profound, since even a small volume of trade represents an infinite rate of change.

Institutional Arrangements between Egypt and Israel

This chapter deals with the institutional framework within which economic relations between Egypt and Israel may develop. Here distinction is made between the short and long run. There is little doubt that at least in the near future these relations are going to be dominated by political considerations. Both parties are, of course, fully aware of the fact that peace between them is only the first, albeit supremely important, step towards a comprehensive settlement of the Arab-Israeli conflict. For the time being, therefore, as long as the prospects of a comprehensive settlement remain unclear, they are likely to refrain from taking steps implying long-term commitments, especially if these might create one-way dependence. They will also seek to preserve their existing relations with the rest of the world. This last point is especially relevant for Egypt, anxious as she is not to disrupt further her political and economic relations with the other Arab countries.

Process of Peacemaking and Interdependence

The term ‘economics of peacemaking’ can mean different things to different people. It could refer to the economic constraints faced by the belligerents and to the economic reasons which impel them to seek peace. It has indeed been suggested that Egypt’s and Israel’s economic predicament contributed to Anwar Sadat’s and Prime Minister Menachem Begin’s decision to move in the direction of peace. The economic burden of carrying on with the war had been enormous for both countries and the expectation of continuously mounting defence outlays was one of the factors which persuaded their leaders to seek a political resolution of their conflict.