Steven C. Kyle

Economic reform and armed conflict in Mozambique

Abstract This paper discusses the evolution of the Mozambican economy in the 1980s. Particular emphasis is placed on the effects of the policy reform package implemented by the government beginning in 1987. This reform, centered around the restoration of economic incentives to the agricultural sector, is an example of a structural adjustment package pursued under extremely adverse conditions. The new strategy has yielded some favorable results, but also illustrates some of the limits of price policy in sub-Saharan Africa.

Developing Country Debt and the Market Value of Large Commercial Banks

The effect on commercial banks of exposure to large amounts of developing country debt has been a topic of increasing concern in recent years. Fear of default on the part of the debtor countries has led to fears for the solvency of the creditor banks since in many cases the total of outstanding exposure to risky debtors exceeds the entire capital base of the banks involved. The paper presents a first effort towards measuring the effects of LDC debt exposure on the market value of large commercial value banks in the United States. Our results indicate that exposure to developing country debt has exerted a measurable and significant negative effect on the ratio of market to book value for these banks.

The Relation Between Farm Production Risk and Off-Farm Income

This paper presents a model of the farm labor allocation decision based on risk and return characteristics of different activities. It is shown that off-farm employment can play an important role in the diversification of farm family income, implying that portfolio models of risk and return to farm activities should take into account the possibility of off-farm employment. A model of the labor allocation decision based on the risk and return characteristics of each activity is developed and tested using a state level cross section of the United States over the post-war period, and performs well in explaining variation in reliance on off-farm income.

The impact of sovereign risk on the market valuation of U.S. bank equities

Abstract This paper tests whether the August 1982 advent of the Latin American debt crisis affected the implicit value of commercial bank loans to major Latin American debtors and hence, the value of equities. In contrast to previous studies, the analysis provides an explicit derivation of the theoretical impact of such an effect, uses a more efficient pooled cross-sectional, time-series estimating technique, addresses the question of whether (ex ante) required returns on bank equities also were affected, and compares the estimates to the behavior of the direct market for Latin American bonds. The results imply that the crisis did cause significant debt discounting as well as an increase in required returns. However, unlike the bond market, most of this equity effect was delayed 6–9 months.

The Political Economy of Angolan Growth: Social & Regional Structure

Too often macroeconomic trends and long term growth prospects are considered in isolation from the very real effect of the physical, social and economic structures. This is particularly so in the case of Angola as its huge flows of revenue from mineral exports collide with the legacy of external debt. However, the interaction of the overarching macro trends with existing political and regional divisions magnifies the difficulties of resolving either the economic or the political problems that have prevented progress for several decades. This paper discusses the ways in which the political divides that have existed for centuries not only remain important even in the post-colonial era, but interact with macroeconomic trends to generate a path of growth and development that is unique to Angola. It is argued that a long term political accommodation involving a solution to Angolas internal political tensions requires addressing all of these issues simultaneously since they all contribute to the current problems and line up precisely the same groups in opposition to each other. These ‘axes of polarisation’ include coastal vs. interior, rural vs. urban/industrial, Mbundu/mestiço vs. Ovimbundu and MPLA vs. UNITA. This discussion proposes a way to overcome these problems and achieve sustained long-term growth.

Application of the Faustmann principle to a short-rotation tree species: an analytical tool for economists, with reference to Kenya and leucaena

Attention has increasingly focussed on fast-growing trees as a potential means of slowing high rates of deforestation and as a source of renewable energy. Unfortunately, the analytical tools for determining economic tractability of tree-growing projects lags behind the popular support to implement them. This paper brings the methodology of the Faustmann Principle, which was established for use with longer growing species, to bear on leucaena, a short-rotation, leguminous tree crop. The principle incorporates biological and economic parameters to derive a function relating the present value of net revenue to rotation length. Additionally, a method of incorporating secondary benefits, such as nitrogen fixation, is demonstrated. Results from the model are applied to Kenya. Research on agro-climatic zones in Kenya is used to indicate the potential volume of leucaena production.

Pitfalls in the measurement of real exchange rate effects on agriculture

Abstract Studies of the effects of real exchange rates on agriculture commonly assume that these effects can be identified as those which pertain to traded goods in the standard Australian model of an open economy. Further, it is common to assume that the indirect effects of changes in the real exchange rate have the same impact on the various production activities within agriculture. This paper discusses the extent to which these stylized facts reflect reality, focusing in particular on: the extent of tradibility in agricultural markets; the irrelevance of results based on “free trade” equilibria to policy analyses; and the importance of the characteristics of crop production functions in estimating the effects of real exchange rate changes. Ignoring these considerations can cause errors in the measurement of policy effects on agricultural incentives.