Exchange Rate Pass-through to Import Prices,and Monetary Policy in South Africa

Abstract

Understanding how import prices adjust to exchange rates helps anticipate inflation effects and monetary policy responses. This article examines exchange rate pass-through to the monthly import price index in South Africa during 1980–2009. Short-horizon pass-through estimates are calculated using both single equation equilibrium correction models and systems (Johansen) models, controlling for both domestic and foreign costs. Average pass-through is incomplete at about 50 per cent within a year and 30 per cent in six months, and in the long-run, from the Johansen analysis including feedback effects, is about 55 per cent. There is evidence of slower pass-through under inflation targeting; pass-through is found to decline with recent exchange rate volatility and there is evidence for asymmetry, with greater pass-through occurring for small appreciations.     

Is There a Social Kuznets Curve? The Influence of Labour Standards on Inequality

This study empirically investigates the impact of core labour standards on income inequality for a range of 90 countries from 1990–2000. A synthetic index of labour standards is computed by means of a Multiple Correspondence Analysis and no significant correlation is found with the Gini index. One of the reasons pointed out is that the effective implementation of core labour standards depends on the quality of the country's political and legal systems. Using instrumental variables in a TSLS model, we found an inverse ‘U’ shaped curve between the new endogenous index of core labour standards and income inequality.     

THE REFORM OF FINANCIAL MANAGEMENT IN THE EUROPEAN COMMISSION: A PUBLIC MANAGEMENT POLICY CYCLE CASE STUDY

Since the mid‐1990s during the Santer, Prodi, and Barroso presidencies, the European Commission has experienced several public management policy cycles. Included on the Barroso Commission's (2004–2008) policy agenda was the reform of internal financial control, prompted by significant irregularities in budget execution signalled repeatedly by the European Court of Auditors (ECA) in its annual Declaration of Assurance (DAS) and Annual Reports. This led to a declared Barroso Commission strategic objective of achieving a ‘positive DAS' by 2009. The proposed solution was ‘integrated internal control’ based on an international reference point within the accounting and auditing professions. The result was a centrally co‐ordinated Commission project aiming to reform management and audit practices within both the Commission and EU member states. This article reports on the ‘positive DAS' and ‘integrated internal control’ policy cycle and explains its agenda‐setting, alternative‐specification, and decisional processes.     

Distributive Effects of Regional Trade Agreements on the ‘Small Trading Partners’: Mercosur and the Case of Uruguay and Paraguay

It is disputed whether trade liberalisation processes are sufficient for reducing poverty and inequality. We explore how ‘gains from trade’ have been distributed in the two minor trade partners of Mercosur, Uruguay and Paraguay, by analysing the impact of trade liberalisation on poverty and inequality through two main transmission channels: prices and income. In the case of Uruguay, trade liberalisation favoured a reduction in poverty indicators but had an almost zero effect on income inequality. In the case of Paraguay, trade liberalisation had a markedly negative impact in terms of poverty yet income distribution improved. We conclude that in the case of Mercosur, the effect of trade on poverty and income inequality varies per country and per region. In particular, we conclude that trade integration policies cannot be regarded as ‘poverty-alleviating’ per se.     

The Heterogeneous Effects of a Food Price Crisis on Child School Enrolment and Labour: Evidence from Pakistan

Using a panel survey, this paper investigates how food price increases in Pakistan in 2008–2010 affect children’s school enrolment and labour. The causal identification relies on the geographical variations in food (wheat) price. The results show that the negative impacts of food price increase on school enrolment differ by gender, economic status and the presence of siblings. The negative effects on school do not directly correspond to the increase in child labour because the transition from being idle to labour activity or from school to being idle is significant, particularly among poor girls. The results also show that children in households with access to agricultural lands are not affected by higher food prices. The analyses reveal a more dynamic picture of the impact of food price increase on child status and contribute to broader policy discussion to mitigate the impact of crises on child education.     

Modules for modernisation: Colonial irrigation in India and the technological dimension of agrarian change

‘Water control’ is central to the political economy of water distribution in large‐scale irrigation in India. The changes in water distribution, irrigation technology, and agrarian development ‐through the introduction of the ‘block system’, technical devices called ‘modules’ and volumetric water pricing ‐ in the Nira Left Bank Canal (Bombay Presidency) in the period 1900–40, are discussed to show the relationship of the three dimensions of water control: technical, managerial and socio‐political. This analysis points to the crucial, but contradictory role of the state in triggering processes of agricultural modernisation through intervention in water management. The debate on the ‘success’ of the block system continues to the present day, but little progress has been made in designing solutions for inequality in water distribution. The article suggests that liberalisation policies create political and institutional space for changing accountability relations, and agricultural price regimes relevant to water management problems. It also argues that social scientists criticising present irrigation practices should position themselves within the engineering domain and try to ‘socialise’ the technical bias of the engineering establishment.     

Terms of trade and class conflict in a computable general equilibrium model for Mexico

A computable general equilibrium model for Mexico is constructed in which class conflict over the distribution of the surplus is the principal determinant of the terms of trade. The model consists of seven social classes and eight productive sectors. Classes are distinguished as ‘fundamental’ or ‘subsumed’ according to whether their incomes are primarily determined by conscious class struggle or by the resulting system of relative prices. Flexible prices are assumed to clear markets for which non‐produced means of production, such as agricultural land, limit supply while output in the remaining sectors is determined by the level of effective demand. For the latter sectors, two theories of price formation are compared and are seen to differ radically in their implicit conception of the nature of class conflict. A ‘Keynes‐Kalecki’ closure is considered in which prices are determined by a fixed mark‐up on costs. This enables capitalists to protect themselves from incursions on the rate of profit due to labour militancy or state‐imposed terms‐of‐trade policy designed to favour peasants andlor the agrarian bourgeoisie. A second, ‘Marx‐Sraffian’ price closure constrains the economy to a wage‐profit‐terms‐of‐trade surface; where the economy conjuncturally resides on this surface depends upon the level of effective demand, wages and terms‐of‐trade policy. Various policy scenarios are investigated under both closures.     

Food Price Transmission and Economic Development

In this paper we challenge the conventional wisdom that the world’s poorest countries are also the most vulnerable to spikes in international food prices. We derive an inverted U-shaped relationship between food price transmission and the development level of a country from a theoretical model. This prediction is subsequently tested in two sets of regressions where economic development is approximated by per capita income and where we control for a number of other potential determinants of food price transmission. The first set of regressions is based on estimated transmission elasticities and the second on actual domestic food price changes during spikes in international food prices. In both sets of regressions we find strong evidence of the existence of an inverted U-shaped relation between food price transmission and income. Thus, food prices in middle income (rather than in low income) countries respond the strongest to changes in international food prices, implying that the poor in these countries are the most exposed to spikes in food prices. We also show that the factors explaining the variation in the estimated transmission elasticities can explain the variation in domestic food price changes during spikes in international food prices equally well.     

Social Hierarchies and Public Distribution of Food in Rural India

In this paper, we develop a simple model to show that consumption of PDS food grains is significantly different between rich and poor households in states in which the PDS functions relatively well; in states in which the PDS is non-functional, the difference is not significant. Using household-level data from three recent thick rounds of the consumption expenditure survey (2004–2005, 2009–2010, and 2011–2012), we find evidence in support of the predictions from the model. This suggests that one way to make the PDS functional is to make it more accessible to poor and underprivileged households.     

Weather Shocks and Spatial Market Efficiency: Evidence from Mozambique

The aim of this paper is to study the association between weather shocks (droughts and floods) and agricultural market performance in Mozambique. To do so, we employ a dyadic regression analysis on monthly maize prices, transport costs, and spatial identification of markets as well as droughts and flooded areas. Our estimates show that, while a drought reduces price differences between markets, price dispersion increases during flood periods, an effect that is mainly driven by increases in transport costs. Finally, floods are found to affect price differences more if markets are closer to each other and if the road infrastructure quality is poor. An important implication of our results is that markets show some degree of efficiency during supply shock periods in Mozambique. However, spatial market integration continues to be insufficient, probably due to high transfer costs.     

Work Contracts and Earnings Inequality: The Case of Chile

Great social inequality has been one of the worrisome features of economic development in Latin America. This study focuses on Chile, one of Latin America's fastest growing economies with one of the highest levels of income inequality during the 1990s. Using micro-level data from the 1994 and 2000 Encuestas de Caracterización Socio-Económica, this article examines the role of work contracts in explaining male and female earnings and earnings inequality among wage and salary workers over the second half of the 1990s. The analysis distinguishes between wage and salary work without a work contract – referred to as ‘informal’ work, and wage and salary work with a work contract. Within the latter group, the study further differentiates by the type of work contract held, such as permanent and a variety of contingent work contracts. The findings reveal that the majority of employees in informal and contingent wage and salary work arrangements earned significantly less than their permanent counterparts. Additionally, informal and contingent wage and salary work arrangements accounted for a small, although increasing, fraction of male and female earnings inequality from 1994 to 2000. Finally, the proliferation of seasonal, fixed-term, and informal wage and salary work arrangements has been one of the few economically significant factors in explaining changes in male and female earnings inequality over the second half of the 1990s.     

Inflation and the savings ratio across countries

Using cross section data, the paper develops and tests the hypothesis that the savings ratio is positively related to the rate of domestic inflation as long as inflation is mild, but negatively related if inflation is excessive. ‘Optimum’ rates for inflation can be derived, but the point estimates in many samples are not significantly different from zero. The model developed tries to capture any distorting effect that foreign capital inflows may have on the inflation‐saving relation, and also tries to distinguish the inflation hypothesis from other traditional hypotheses such as the life‐cycle hypothesis and the Keynesian ‘absolute’ income hypothesis.     

Fear of a black planet: anarchy anxieties and postcolonial travel to Africa

Western travel to Africa has historically involved the construction and consumption of African otherness. In the postcolonial era this is most clearly evident in Western tourism to the continent, where Africa is frequently marketed as an exoticised destination to see and consume both ‘nature’ and ‘native’. The Western tourist gaze often requires fixing Africans, both in a spatial site (‘village’) and a temporal site (‘tradition’). Africans on the move (both spatially and temporally) are often seen as threatening to the Western‐established images of Africa, which are grounded in a long‐standing fear of ‘unorded’ and ‘chaotic’ African space. After 11 September and the USA's ‘war on terror’ retributive response, the political implications of these fears are evinced in the writings of Robert Kaplan and his popular ‘coming anarchy’ thesis. The article concludes with a critique of Kaplan's work and a discussion of its implications for Africa and African international relations.     

Education and Household Inequality Change: A Decomposition Analysis for India

Rising returns to education have increased wage inequality in many developing countries, but their impact on inequality between households is less clear. This study asks how education contributed to household inequality in India during the period 1993–2004, using a regression based decomposition method. We find that rising returns to education of employees did not increase household inequality, because many household heads are self-employed. Instead, rising inequality in education contributed to higher inequality, partly because fertility declined more slowly among illiterates. These new insights into the education-inequality relationship in India underline the importance of household-level analysis to complement earnings inequality research.     

The Poverty of Statistics and the Statistics of Poverty

This paper offers a critique of the picture of world growth and world inequality generally disseminated by international agencies. The positive view commonly presented depends on the widespread consensus that economic performance should be measured using ‘Purchasing Power Parity’ (PPP) statistics, instead of market exchange rates. Although originally conceived narrowly as a basis for comparing living standards, PPP indicators are now indiscriminately promoted as an unexceptionable standard for comparing and aggregating national income statistics. This article highlights the flaws in the PPP approach by accepting the claims made on their behalf at face value. It shows that, even on the basis of these claims, the wrong conclusions have been drawn. By comparing PPP and market exchange rate measures of inequality it shows that what really took place, at the end of the last century, was a systematic reduction in the prices of consumption goods in the Third World. PPP statistics have concealed this underlying and unsustainable trend, allowing it to be packaged as a stable reduction in poverty. Neither genuine growth, nor lasting poverty reduction was achieved over this period. The fall in the price of consumer goods masked a systematic failure to overcome the central problem of development—the high price of capital goods, which PPP statistics understate, and of intermediate goods, which they completely omit.     

Civil war and the coalition government of democratic Kampuchea

This article explores the relationship between the politics of international development and the reproduction of global inequality. I argue that contemporary discourses about— and the practices of—‘development for developing countries’ represent an attempt to reconstitute the political utility of the ‘Third World’. In an era of globalisation the deployment of the notion of a Third World of ‘developing countries’ which require immediate, systemic attention through the discourse and practice of international development continues to provide a way of both disciplining and displacing the global dimension of social and political struggle. I refer to this dynamic in terms of the political utility of the Third World, which, I argue, has been conducive to the organisation of global capitalism and the management of social and political contradictions of inequality and poverty. I develop this argument by drawing on the historical implications and legacy of ‘international development’ as practised in and on the Third World and through a critical analysis of the methodological premises that constitute international development. I illustrate this by drawing on a key strategy aimed ostensibly at development: the Poverty Reduction Strategy Papers (prsp) approach, promulgated by the World Bank and the imf, which I discuss in relation to the ‘development agenda’ inaugurated during the 1999 wto meeting in Doha (Qatar). I argue that the ideology and practice of the global politics of international development reinforce the conditions of global inequality, and must be transcended as both an analytical framework and an organising principle of world politics. While the prsp and related approaches are currently presented as key elements in the building of the ‘architecture for (international) development’, what is emerging is a form of governance that attempts to foreclose social and political alternatives.     

Navigating the dichotomy: The top public servant's craft

How in their day‐to‐day practices do top public servants straddle the politics–administration dichotomy (PAD), which tells them to serve and yet influence their ministers at the same time? To examine this, we discuss how three informal ‘rules of the game’ govern day‐to‐day political–administrative interactions in the Dutch core executive: mutual respect, discretionary space, and reciprocal loyalty. Drawing from 31 hours of elite‐interviews with one particular (authoritative) top public servant, who served multiple prime ministers, and supplementary interviews with his (former) ministers and co‐workers, we illustrate the top public servants’ craft of responsively and yet astutely straddling the ambiguous boundaries between ‘politics’ and ‘administration’. We argue that if PAD‐driven scholarship on elite administrative work is to remain relevant, it has to come to terms with the boundary‐blurring impacts of temporal interactions, the emergence of ‘hybrid’ ministerial advisers, and the ‘thickening’ of accountability regimes that affects both politicians and public servants.     

‘Occupied territory is occupied territory’: James Baldwin,Palestine and the possibilities of transnational solidarity

In his 1966 essay ‘A Report from Occupied Territory’, James Baldwin wrote that ‘occupied territory is occupied territory, even though it be found in that New World which the Europeans conquered’. Though written 50 years ago, Baldwin’s observations continue to resonate, indicating historical trends across geographical experiences affected by the legacy of colonialism. A growing theme in development and peace building studies relates to a kind of boundary crossing that sees academics and activists drawing linkages across spatial and temporal divides. The situation in Palestine–Israel has taken an increasingly central role in mobilising transnational solidarities that cross such boundaries. By examining James Baldwin’s analysis of Harlem’s ‘occupation’ – as well as drawing from a range of voices such as Achille Mbembe, Frantz Fanon, Edward Said, Toni Morrison and Laleh Khalili – this paper will explore the shared experiences of racism, colonialism, military occupation and dispossession that separate and divide, and the possibilities for transnational solidarities that defy those separations.     

A Method to Update Poverty Maps

The small area estimation method proposed by Elbers et al. (Elbers, C., Lanjouw, J. and Lanjouw, P. (2003) Micro-level estimation of poverty and inequality. Econometrica, 71(1), pp. 355–364) combines a household survey and a census to generate a disaggregated map of poverty measures. Since censuses are often conducted every 10 years, construction of poverty maps on a regular basis is not straightforward. This article discusses methods to update poverty maps for years between censuses by combining an old census and new household surveys. These discussed methods are illustrated by producing a poverty map in Vietnam for the years 2004 and 2006 using the 1999 Population and Housing Census and Vietnam Household Living Standard Surveys in 2002, 2004 and 2006. The validation of the updating methods is examined by comparing poverty estimates in 2006 obtained from the updating methods with benchmark poverty estimates obtained from the standard ‘small area estimation’ method using data from the 2006 Vietnam Household Living and the 2006 Rural Agriculture and Fishery Census.     

Social Identity and Educational Attainment: The Role of Caste and Religion in Explaining Differences between Children in India

The aim of this article is to gauge the size of the educational gap between children, aged 8–11 years, belonging to the different social groups in India. It is well established that educational attainments vary considerably between India's caste and religious groups with Muslims, Dalits (the Scheduled Castes), Adivasis (the Scheduled Tribes), and the ‘Other Backward Classes’ (the OBC) being the most backward. Using data from the Indian Human Development Survey of 2005 – which tested over 12,300 children, aged 8–11, for their ability to read, write, and do arithmetic at different levels of competence – this study examines inequalities within social groups in the test scores of children to argue that inter-group comparisons of educational attainment should take into account not just the mean level of achievement of the children in a group but, also, the degree of inequality in the distribution of achievements between children in the group. The article then proceeds to enquire why different children have different levels of educational achievement. The central conclusion is that, after controlling for a number of parental, household and school-related factors, children from all the different social groups, when compared to Brahmin children, were disadvantaged, in some or all of the three competencies of reading, arithmetic, and writing. However, this disadvantage was greatest for Muslim, Dalit, and Adivasi children. These children were disadvantaged with respect to all three competencies and their disadvantage embraced failure as well as success. Using a decomposition analysis, the article quantifies the ‘structural advantage’ that Brahmin and High Caste children enjoyed over their Dalit and Muslim counterparts.