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We consider a domestic monopolist who is protected by an import quota on the product he produces. He faces a domestic demand curve which is characterized by a constant price elasticity. He is unable to export and has an upward sloping marginal cost curve. We demonstrate that in this case his employment of labor rises with the import quota until imports rise to a fraction lie of domestic output where e is the elasticity of domestic demand. Thus, the employment maximizing quota sets permissible imports at a fraction of domestic output which is at least as high as the reciprocal of the elasticity of demand. We also make a case for liberalizing all the way right away, "cold turkey liberalization. "

This paper aims to investigate the relationship between capital flow surges, reversals and sudden stops.

Emphasizing the importance of looking at the behavior of domestic as well as foreign capital flows, the authors distinguish sudden stops from capital flow reversals by attributing the former to foreign capital flows only.

It is found that, despite the large differences in the number of surges identified by several different measures in the literature, a majority of surges do end in reversals of some type. The percentages tend to be slightly over half for surges in net capital flows, but on average, 70 per cent of gross surges end in sudden stops. Furthermore, contrary to popular belief, approximately half of sudden stops and net capital flow reversals are not preceded by surges. It is also found that surges that persist longer are more likely to turn into sudden stops and reversals.

The authors find substantial empirical differences in the characteristics of sudden stops (based on gross foreign flows) and reversals (based on net flows).

Large inflows of financial capital are not always a strong indicator that a country’s economic policies will continue to provide stability in the future. They may signal an increase rather than reduction in the risk of future instability.

This study focuses on an issue that has been less explored to date, the relationship between capital flow surges, reversals and sudden stops. The authors distinguish, redefine and document differences among capital flow reversals and sudden stops. Duration of surges is related to the likelihood of having reversals and sudden stops.

This study aims to critically review recent contributions to the methodology of financial economics and discuss how they relate to one another and directions for further research.

A critical review of recent literature on new methodologies for financial economics.

Recent books have made important contributions to the study of financial economics. They suggest new approaches that include an emphasis on radical uncertainty, adaptive markets, agent-based modeling and narrative economics, as well as extensions of behavioral finance to include concepts such as diagnostic expectations. Many of these contributions can be seen more as complements than substitutes and provide fruitful directions for further research. Efficient markets can be seen as holding under particular circumstances. A major them of most of these contributions is that the study of financial crises and other aspects of financial economics requires the use of multiple theories and approaches. No one approach will be sufficient.

There are great opportunities for further research in financial economics making use of these new approaches.

These recent contributions can be quite useful for improved analysis by researchers, private participants in the financial sector and macroeconomic and regulatory officials.

Provides an introduction to these new approaches and highlights fruitful areas for their extensions and applications.

The purpose of this paper is to test whether financial crises themselves provide some degree of ex post discipline. In other words, is there learning from the mistakes associated with crises? The authors test this hypothesis on credit growth, a frequent contributor to banking crises.

The study uses statistical tests (comparison of means) on a sample of 72 banking crises, the onset of which occurred between 1980 and 2008. Tests for significance of the difference are conducted using Kolmogorov–Smirnov equality in distribution tests.

The results show that real credit growth fell substantially (relative to average) by about 8 per cent points from pre- to post-crisis periods, and that average banking regulation and supervision strengthens after a crisis.

This paper provides empirical support for the proposition that while financial markets may fail to give sufficient warning signals before a financial crisis, they may discipline governments to undertake reforms in the aftermath of a crisis.

There has been significant interest in the classification of exchange rate regimes in order to investigate a wide range of hypotheses. Studies of the effects of exchange rate regimes on crises and other aspects of economic performance can have important implications for policy choices. The paper provides a guide to the major new large data sets that classify exchange rate regimes and to critically analyze important methodological issues.

The study surveys and critiques the literature and provides theoretical analysis of major issues involved in classifying exchange rate regimes.

The study finds that all of the new data sets have problems but some have more problems than others and several of them are substantial improvements on what was previously available. It is also shown that the best ways to classify depend on the issue being addressed and that for detailed studies variants of measures using the concept of exchange market pressure are the most promising. Directions for future research are also discussed.

The paper makes researchers aware of the new data sets that are available and discusses their strengths and weaknesses. It also presents original analysis of several of the major conceptual issues involved in classifying exchange rate regimes.

Study of the interdependence among economies is of considerable importance. This area includes issues such as the increasing importance of regional economic interactions, the effects of economic growth and recession in the advanced economies on emerging market countries, and financial contagion. A wide range of related terms and methodologies are used in the literature of interdependence. The purpose of this paper is to review the major concepts and various measurements of interdependence in financial markets and the real economy, serving as a reference and benchmark for future research on interdependence among specific regional or global economies.

Major measurements of interdependence are reviewed from simple approach to more complicated ones, and strengths and weaknesses of the various measurements of interdependence are discussed.

This paper surveys the various major measurements of interdependence and illustrates how they have been used to address a substantial range of issues.

The paper shows that studies of macroeconomic and financial interdependence use the same types of econometric measurements. The review and critiques of these various types of measures should be of value to those wishing to do research in these areas and also to those wishing to have a better understanding of papers that they read.

The purpose of this paper is to review concepts and measurements related to financial globalization such as financial openness, financial integration, monetary interdependence, and the mobility and movement of capital.

This paper surveys the theoretical and empirical literature on monetary interdependence and financial globalization. The major ways in which these concepts are measured empirically are presented and critiqued.

Disagreements about the degree of financial integration and capital mobility are, in part, explained by the different approaches to measuring these concepts. One major challenge in obtaining a good measures is controlling for other major factors that may influence observed correlations among financial variables. While these relationships still cannot be estimated precisely, it can be safely said that while high for many countries, few if any financial markets are perfectly integrated across countries.

By offering a comprehensive analysis of these different measurements, the paper underscores the different implications for national policies and the operation of the international monetary system of different dimensions of globalization. In particular, the proposition that financial globalization has left most countries with little autonomy for domestic monetary policy is subject to serious debate, at least in the short run.

The purpose of this paper is to discuss implications of the global crisis for economic and financial research and policy.

The paper reviews many recent studies on the crisis and offers the author's views on some of the most important lessons to be drawn from the crisis

The review counters views that the crisis reflected a basic failure of economics, but agrees that it undercuts some particular theories and approaches to economics. More attention needs to be given to imperfections in the operation of both markets and governments, drawing on insights from behavioral and neuro economics and finance and political economy analysis and recognizing the importance of limited information and uncertainty about correct models. The creation of perverse incentive structures explain a large part of the financial excesses that led to the crisis. Financial considerations need to be integrated much more closely with macroeconomic analysis and financial risk analysis needs to pay more attention to economic considerations. Useful insights can be drawn from many different theories and approaches and we should not expect any one theory to have all the answers. The excesses observed in the advanced economies do not imply that there are not enormous benefits to be gained from further financial liberalization in emerging market economies, but they do show that great care must be taken in establishing strong supervision of such liberalizations and highlight many of the dangers to look out for.

The paper offers a guide to the literature for those interested in learning more about the causes and effects of the crisis and policy responses and offers a number of suggestions for fruitful research topics and policy strategies.