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Investment in most heavily indebted countries has been weak since 1982. The widely accepted debt overhang proposition interprets the investment drop as a moral hazard problem: a heavy debt burden raises the incentive to consume, because the marginal benefit of investment would go to the creditor. This paper develops several hypotheses on optimal reactions of a credit-constrained debtor country on an increase in debt, on variations in the credit constraint, on changes in interest rates, and contrasts these with the predictions stemming from the debt overhang proposition.

Empirical specifications of conventional investment functions and consumption functions (along the Permanent Income Hypothesis) lead to reject the debt overhang proposition, but find that the switch from positive to negative external transfers to the debtor countries is an important explanation for their investment drop. The major policy conclusion is that the 1989 shift in international debt management (the Brady ...

This paper is one of four in this Working Paper Series, focusing on financial liberalisation, along with those of Miller and Weller, Kupiec and Blundell-Wignall and Browne. Its main purpose is to evaluate the imperfections still affecting deregulated credit markets. In particular, the paper examines the extent to which rationing continues to be present in credit markets and its implications for credit allocation and the transmission of monetary policy. In addition, the role of deregulation in financial market fragility and instability and its macroeconomic consequences are discussed ...

The paper begins with a brief description of the relationship between Yugoslavia and its creditors throughout the 1980s, providing a background for the introduction of debt conversions in Yugoslav practice. The main features of the legal environment for debt conversions, especially of the debt conversion programme initiated in March 1989, are then reviewed. The paper then focuses on the main patterns of debt conversions executed in Yugoslavia with respect to their volume, structure of transactions, sources of funds and debt reduction effects. It appears in particular that the Yugoslav debt conversion programme presents many original features when compared with similar programmes implemented in several developing countries. Finally, the paper provides a review of the micro and macroeconomic implications of debt conversions, including the cost and benefits of these transactions, and concludes that this programme has been quite successful for Yugoslavia ...

This paper provides statistically significant international evidence on the interaction between funded pensions and aggregate savings, after controlling for country-specific effects and for other saving determinants that have typically been identified in earlier cross-country studies. Using panel data for eleven countries (both OECD and non-OECD), this study goes beyond earlier work which has been based on individual country studies only (which have suffered from a small number of degrees of freedom). Building several proxies of pension wealth based on internationally comparable pension fund and life insurance data, the paper estimates the relationship between aggregate saving rates and pension wealth using ordinary least squares and two-stage least squares over the 1982-93 period.

The empirical analysis supports the predictions of a simple two-period life-cycle saving model that incorporates tax treatment of pension returns, population heterogeneity, capital market imperfection and ...

The recent currency crises in Latin America and Asia have hit countries with strong macroeconomic fundamentals but weak domestic financial systems. Private capital flows, attracted by disorderly financial liberalisation and exchange rate pegs, reversed abruptly when financial-sector weaknesses became apparent. Often, domestic financial systems have proved too weak a conduit for heavy capital inflows, resulting in declining credit quality and financial vulnerability to speculative currency attacks. Developing countries are therefore advised to pay close attention to indicators of financial vulnerability, in particular to short-term debt levels as a fraction of official foreign exchange reserves, as well as to currency and maturity mismatches in private-sector balance sheets. This paper points to the avenues that can be pursued to avoid a rise in the vulnerability indicators above critical levels ...

Some of these avenues are uncontroversial, but deceptively hard to implement. Good ...

The Conference addressed broad areas through a format that permitted business representatives to identify problems, governments to discuss how they hope to deal with the problem and international organisations to suggest how they can help to implement the solution internationally.

Corruption in customs administrations is a major problem in many African countries. Data from the period 1990-96 are used to examine several hypotheses concerning the determinants of customs fraud in Senegal and Mali. Statistical tests using product-by-product data support the widely held view that high levels of taxation lead to fraud. The findings also show that hiring a pre-shipment inspection company can be an effective tool in fighting corruption, but only if it is accompanied by internal reforms like computerisation of customs procedures. Finally, changes in determinants of corruption, such as levels of taxation, have themselves depended upon broader political changes in each of the two countries ...

Following the revision of the Oslo Manual (1997) and the preparation of the second Community Innovation Survey (CIS-2), a number of OECD and NESTI observer countries have carried out (or are preparing) new innovation surveys. According to national policy needs, these new national innovation surveys may or may not fully follow the Oslo Manual methodology and/or the proposed CIS-2 questionnaire prepared by EUROSTAT in co-operation with national experts and the OECD.

The following document is intended to provide the main characteristics of national innovation surveys carried out (or intended to be carried out) in 1997-99 in OECD non-CIS-2 participants and NESTI observer countries. After a summary description of all national innovation surveys (including CIS-2 participants), more detailed information is presented by country for non-CIS-2 participants. This basic information will be helpful in evaluating the extent to which internationally comparable information could be expected from ...

Evidence of public concerns about globalisation is pervasive -- in the newspapers, on the Internet and more formal discussions of public policy. The business community has been attempting to position itself with respect to these concerns. Indeed, voluntary efforts to define and implement appropriate standards for business conduct constitute one of the more prominent managerial developments in recent years. These efforts have also often involved significant contributions from NGOs, governments and intergovernmental organisations.

The issuance of voluntary codes of conduct has been an important facet of these developments. Such codes are voluntary expressions of commitment made by an organisation to influence or control behaviour for the benefit of the organisation itself and for the communities in which it operates. Private companies and associations of companies have issued such codes, calling them codes of conduct, ethics statements or guidelines, in response to both internal and ...

The roles and functions of the school library are changing rapidly and in fundamental ways. The aim of the report is to provide a set of guidelines for people involved in the design of new and existing schools – especially those involved with school libraries and their links with the local community.

This paper examines the robustness of explanatory variables in cross-country economic growth regressions. It employs a novel approach, Bayesian Averaging of Classical Estimates (BACE), which constructs estimates as a weighted average of OLS estimates for every possible combination of included variables. The weights applied to individual regressions are justified on Bayesian grounds in a way similar to the well-known Schwarz criterion. Of 32 explanatory variables we find 11 to be robustly partially correlated with long-term growth and another five variables to be marginally related. Of all the variables considered, the strongest evidence is for the initial level of real GDP per capita ...

This paper presents empirical estimates of human-capital augmented growth equations for a panel of 21 OECD countries over the period 1971-98. It uses an improved dataset on human capital and a novel econometric technique that reconciles growth model assumptions with the needs of panel data regressions. Unlike several previous studies, our results point to a positive and significant impact of human capital accumulation to output per capita growth. The estimated long-run effect on output of one additional year of education (about 6 per cent) is also consistent with microeconomic evidence on the private returns to schooling. We also found a significant growth effect from the accumulation of physical capital and a speed of convergence to the steady state of around 15 per cent per year. Taken together these results are not consistent with the human capital augmented version of the Solow model, but rather they support an endogenous growth model à la Uzawa-Lucas, with constant returns to ...

Latin America has long had the most unequally distributed income in the world because of land ownership patterns, development and education policies and demography, which have swelled the supply of unskilled labour and demand for skilled workers, leading to widening inequality. Import substitution produced high growth but also high inequality and led to a debt crisis. But globalisation reforms in the 1990s did not reduce inequality and sometimes increased it. Now, because of poor export performance, the priority is the tricky problem of how to boost the growth rate. The aim should be to absorb as much of the region’s excess of unskilled labour as possible, especially through construction and agriculture. Growth with equity should also focus on supporting and investing in backward regions. But the long-term key is education, which will narrow skill differentials, reduce inequality and increase the growth rate ...

Some 80 earthquake specialists, architects, engineers and civil servants from a dozen countries met to discuss the different relationships which may occur between educational facilities and natural disasters; the emphasis was on the implications and effects of earthquakes and the appropriate design and use of educational buildings, both in their role as protection for their everyday users and in their role as emergency shelter for potential earthquake survivors. The following article summarises the findings on the topics of educational buildings; partnerships; training; standards, regulations and procedures; finance and legislation; and research and support.

This is an example of an architect working with future school users in Iceland to design their school. The architect has developed a process that he uses with students, staff and the local community to create a learning environment in which the design intends for freedom and creativity to be integrated into the students’ daily learning experiences. The school to be built, called Ingunnarskoli, aspires to be a place for learning that is based on the needs of children, their families and their community.

An early criticism of the Stability and Growth Pact has pointed to its asymmetric nature and the weak mechanisms to prevent politically-motivated fiscal policies: its constraints would bite in downswings but not in upswings, especially if in the latter the electoral cycle increases the temptation to run expansionary policies. We find that the experience of the initial years of EMU lends support to this criticism. Overall, unlike the experience in the run-up to EMU, fiscal policies had an expansionary bias, and a “genuine” discretionary boost took place in correspondence to political elections. Both sign and composition of such discretionary changes are in line with the predictions of the recent literature on electoral budget cycles. Closer fiscal surveillance may help detect early such behaviour, but it is unlikely to curb the incentives to run politically-motivated fiscal policies when elections approach ...