I. N., and C. Velasco "Optimal
Fractional Dickey-Fuller Tests for Unit
04-02. Maurer, N., and A. Gomberg
"When the State
is Untrustworthy: Public Finance and Private
Banking in Porfirian Mexico"
Abstract: All sovereign governments
face a commitment problem: how can they promise
to honor their own agreements? The standard
solutions involve reputation or political
institutions capable of tying the hands of
the government. Mexico's government in the
1880s used neither solution. It compensated
its creditors by enabling them to extract
rents from the rest of the economy. These
rents came through special privileges over
banking services and the right to administer
federal taxes. Returns were extremely high:
as long as creditors believed that the government
would refrain from confiscating all their
assets (let alone repaying their debts) less
than twice a decade, they would break even.
04-03. Sadka, J., and J. L. Negrín
"Full vs. Light-Handed
Regulation of a Network Industry"
04-04. Martinelli, C., and R.
in Cartels: Theory and Evidence from the
04-05. Lobato, I., S. Pratap, and A. Somuano
and Balance Sheet Effects of Exchange Rate
Volatility in Mexico: A Firm Level Analysis"
Abstract: We use Mexican firm-level
data to study the role of currency mismatches
in exacerbating the negative effects of a
devaluation in the corporate sector and to
investigate what drives Mexican firms to borrow
in foreign currency. Our results show that
large firms and exporters tend to borrow more
heavily in foreign currency. The presence
of foreign currency denominated debt poses
a significant risk to balance sheets at the
time of devaluation. Our findings suggest
that in Mexico, the balance sheet effects
of a devaluation far outweigh the competitiveness
04-06. Pratap, S., and C. Urrutia "Firm
Dynamics, Investment, and Debt Portfolio:
Balance Sheet Effects of the Mexican Crisis
Abstract: We build a partial equilibrium
model of firm dynamics under exchange rate
uncertainty. Firms face idiosyncratic productivity
shocks and observe the current level of the
real exchange rate each period. Given their
current level of capital stock, firms make
their export decisions and choose how much
to invest. Investment is financed through
one period loans from foreign lenders. The
interest rate charged by each lender is set
to satisfy an expected zero-profit condition.
The model delivers a distribution of firms
over productivity, capital stocks and debt
portfolios, as well as an exit rule. We calibrate
the model using data from a panel of Mexican
firms, from 1989 to 2000, and analyze the
effect of the 1994 crisis on these variables.
As a result of the real exchange rate depreciation,
the model predicts: (i) an increase in the
debt burden, (ii) an increase in exports,
and (iii) a large decline in investment. These
real effects are consistent with the evidence
for the Mexican crisis.
04-07. Elbittar, A., A. Gomberg, and
L. Sour "Group
Decision-Making in Ultimatum Bargaining:
An Experimental Study "
04-08. Martinelli, C., and R.
Are Stabilizations Delayed? Alesina-Drazen
04-09. Rojas., J., A., and Carlos., Urrutia., "Social
Security Reform with Uninsurable Income
Risk and Endogenous Borrowing Constraints"