Journal of Policy Modeling
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Explaining Unemployment Trends in the Netherlands
Robert A.J. Dur

In this paper, a small macroeconomic model of the Dutch labour market is estimated. The model is used to detect the causes of the rise in unemployment since the early seventies. In contrast to existing empirical work, we treat labour supply as an endogenous variable. This adjustment does not only yield a more informative model, but also appears to have serious consequences for the conclusions drawn. In particular, we show that the detrimental effect of the replacement rate on unemployment has been overestimated in earlier studies. Furthermore, we include contractual working time in the analysis. Our estimates imply that work sharing does reduce unemployment, but lowers the total hours worked.

Does Foreign Aid Cause the Adoption of Harmful Economic Policies?
Henry M. Schwalbenberg

After the Cold War, many of the United States' policies have had to be reviewed for relevancy in the new world order. One of the US' most practiced foreign policies was the provision of aid to countries in the hopes that they would not fall to Communism. With the threat of Communism diminished, the ideological base for providing foreign aid shifted from political to humanitarian. Some opponents of this policy counter that humanitarian aid is harmful to countries because it perpetuates poverty and prevents economic growth. Schwalbenberg tests this argument by building a model to test whether or not foreign aid causes the adoption of harmful economic policies within the receiving country.

Economic Integration, Market Size and the Location of Industries
Johan Torstensson

Torstensson presents this paper in order to analyze the effects of economic integration, market size and the location of industries. With the forming of trade pacts such as North American Free Trade Agreement (NAFTA) and the European Union it is important to study the success of these pacts and the effects on nonmember countries. Torstensson proposes that previous models have failed to take into account the interplay between trade impediments and market size, allowing for the presence of a customs union.

Dynamics of Macroeconomic Adjustment With Growth: Some Simulation Results
Sushanta K Mallick
This paper examines the impact of several macroeconomic policies, both demand and supply management policies, on economic activity within an small macroeconomic simulation model. The model is based on a standard analytical framework that underlies adjustment policies in developing countries. The standard approach has been to use aggregate government expenditure as an instrument of fiscal policy to shock economic activity in a developing economy, with a negative dynamic response typically observed. In the context of such a small macroeconomic simulation model we decompose government expenditure into consumption and investment expenditure. Simulation exercises with and without model-consistent expectations throw up some contrasting results in the sense that fiscal policy can influence output positively through the effects of public sector investment on private investment in a developing economy such as India.
Price Instability, Trade and Futures Markets
C.W. Morgan
This paper models the degree to which free trade can cause price volatility to increase in a market for a soft commodity particularly when there has been a policy shift from barrier induced autarky to completely free trade. Given the possibility that it may increase volatility, can the introduction of a futures market for that commodity provide a means for reducing price volatility. Using the experience of the British maincrop potato market and the London Potato Futures Market as examples, this paper shows that whilst trade may indeed lead to increased volatility, the futures market does reduce intra-seasonal price volatility but has little impact on inter-seasonal volatility.
The Premium in Black Foreign Exchange Markets: Evidence From Developing Economies
Dr. Yochanan Shachmurove
This paper examines the determinants of the premia between the black and official exchange rates using monthly data for seventeen developing countries. The premium is hypothesized to be positively influenced by the official depreciation-adjusted interest rate differential and dollar value of domestic assets. It is hypothesized to be negatively influenced by the official real exchange rate, exports, and a seasonal factor associated with tourism. The countries studied are: Bangladesh, Brazil, Fiji, Gambia, Ghana, Guyana, Hungary, Ireland, Jamaica, Kenya, Nepal, Nigeria, Philippines, Somalia, South Africa, Uganda and the former Yugoslavia.

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