D.Comm. / Foreign debt affects the economy through three main channels, namely: the debt overhang effect, the liquidity constraint effect and the uncertainty effect. The main aim of this study is to derive an optimal level of foreign debt relative to Gross Domestic Product (GDP) for South Africa by investigating these channels. Incurring foreign debt is like a double edge sword. On the one side the foreign debt is needed for economic development (from a demand perspective) and on the other side the level of debt impacts on the economy through higher domestic interest rates, via the sovereign risk spread, (from a supply perspective). The factors that impact on capital flows as shown by previous periods of financial distress in the global capital markets and debt sustainability were investigated. This study shows that risk spreads are driven by both internal and external factors. Investors will price into the secondary risk spread their perceptions of the sustainability of foreign debt. This is also impacted by external factors such as contagion and the credit rating of a country. The different objectives of government in the internal capital market since 1994 and the secondary objectives of building liquidity benchmarks, diversifying the foreign currency portfolio, broadening the investor base in RSA bonds and borrowing at the most effective rates, are also discussed. A number of equations were estimated using the Ordinary Least Squares (OLS) method and the values for government foreign debt were varied to test the impact on the familiar IS/LM/BP and AS/AD models. These models were further used to determine the debt overhang and liquidity constraint effect. It was found that foreign debt has an asymmetric impact on economic growth where it contributes to economic growth up to a level of approximately 35 per cent of GDP, where after it has a negative impact on economic growth.

Research report submitted towards the award of Master of Arts Department of International Relations University of the Witwatersrand, Johannesburg, 2017 / This dissertation investigates FOCAC and TICAD contributions towards development on the African continent. The research explains the architecture of the latter conference diplomacy institutions. Japan and China are argued to be competing through evidence from the different fields that give foreign assistance to. Jospeh Nye’s soft power as theoretical framework will guide the research’s understanding of Chinese and Japanese engagements in African development. The research found that FOCAC outweighed TICAD in financial contributions however TICAD through JICA had more grassroots level contributions. China was seen to be focused on bilateral relations aimed at supporting state-led companies in big infrastructure development. Japan is argued to be more engaging with external actors while supporting African development and in addition, showed more support for the African Union’s policies. China has ‘win-win’ and Japan has ‘partnership’ both in line with African Pan -African ideals. Africans are lacking policy and guidelines in dealing with foreign partners and argued to organise themselves and respond to Japanese and Chinese interests collectively. Agenda 2063 that mentions external partners as a source of funding for development is not enough to use a policy. African development policies are seen to have failed previously due to unfulfilled promises from external partners. The research argues that African people should take FOCAC and TICAD as learning spaces and take a leadership role in their own development. / XL2018

A dissertation submitted to the Faculty of Commerce, Law and Management, University of the Witwatersrand, Johannesburg, in fulfilment of the Requirements for the Degree of Doctor of Philosophy 19 August 2015 / This thesis focusses on the impact of Foreign Direct Investment (FDI) on economic performance in selected African countries over the period 1980-2012. The thesis is divided into five chapters and three of them are empirical. Chapter 1 is the introduction. Chapters 2, 3 and 4 are empirical chapters examining the impact of FDI on various indicators of economic performance. Chapter 5 concludes by giving policy recommendations. In chapter 1 we provide a background, motivation, objectives, hypothesis to be tested, gaps in the literature, contributions of the study and the main findings. Chapter 2 examines the link between FDI and domestic investment and the role of host country factors namely financial development, institutional development and trade openness. We use the ordinary least squares, random effects, fixed effects and the system GMM methodologies on a panel of 48 African countries over the period 1980 to 2012. The results show that FDI has a crowding out effect on domestic investment and that improved institutions and trade openness do mitigate the substitutionary effect of FDI on domestic investment. This implies a need to come up with policies to improve local conditions by strengthening institutional quality and enhancing trade openness. Chapter 3 investigates the impact of FDI on productivity growth and the role of relative backwardness (the technology gap) on a panel of 45 African countries over the period 1980-2012. We use two measures of relative backwardness namely: the distance from technological frontier and the income gap. We apply the fixed effects, random effects and system GMM method to account for the issues of endogeneity. The results show a general insignificant effect of FDI on TFP growth. This suggests that FDI has a limited effect on productivity growth. The analysis of the advantage of relative backwardness does not support the convergence theory of Findlay (1978) and Wang and Blomstrom (1992). The large technology gaps in African countries hinder their ability to absorb foreign technologies from advanced countries. Chapter 4 analyses the long run dynamic relationship between FDI, exports, imports and profit outflows in 47 African countries over the period 1980-2012 by means of panel cointegration techniques. The results from the panel cointegration tests show that a long run relationship exists between the variables. Our findings provide evidence on the adverse long run effects of FDI on the current account in African economies. In particular, the results show that, FDI inflows lead to a decrease in exports and an increase in both imports and profit remittances. These findings confirm that indeed profit outflows by multinational companies are one of the main factors driving current account deficits in African countries. Chapter 5 is the conclusion. We provide a key summary of the key issues covered, the main findings, the key contributions of the study and the policy recommendations. We also suggest areas for further research in the future. / MT2017

許寶強. / Thesis (M.A.)--香港中文大學. / Manuscript (reprint of computer printout). / Includes bibliographical references (leaves 129-139). / Xu Baoqiang. / Thesis (M.A.)--Xianggang Zhong wen da xue. / 鳴謝 / 論文撮要 / 前言 --- p.1 / Chapter 第一章 --- 七九年以來中國的外貿開放政策 --- p.9 / Chapter 第二章 --- 理論問題 --- p.35 / Chapter 第三章 --- 進出口成本 --- p.56 / Chapter 第四章 --- 進出口的結構變化 --- p.75 / Chapter 第五章 --- 貿易與發展問題 --- p.89 / Chapter 第六章 --- 結論 --- p.122 / 附件一 --- p.125 / 附件二 --- p.127 / 參考書目 --- p.129

Typescript (photocopy). / Digitized by Kansas Correctional Industries / Department: Sociology.

This dissertation combines theoretical modeling and empirical analysis in macroeconomics, with a focus on open economies. It contains three chapters that study macroeconomic dynamics in the presence of credit frictions and the scope for stabilization policies in this context. Chapter 1, "Macroeconomic Effects of Commodity Booms and Busts: The Role of Financial Frictions", studies the real effects of commodity price shocks in small open commodity exporters; and the role of financial frictions in the transmission of these shocks to economic activity. I begin by estimating a panel VAR system for two groups of countries heavily exposed to commodity goods exports, one containing only advanced small open economies, and the other only emerging small open economies. I show that commodity price shocks are important sources of business cycle fluctuations, and have stronger effects on real activity, credit, and country interest rate in emerging countries. Motivated by these results, I construct a multi-sector open economy model with a banking sector to gauge the importance of different financial frictions in the transmission of commodity price shocks. I find that the main transmission channel is the interaction between the differences in working capital constraints at the firm level and the effect of commodity prices on the country interest rate. Moreover, I show that the financial accelerator and balance sheet mismatches in the banking sector don't have a relevant quantitative amplification effect. Chapter 2, "International Reserves, Credit Constraints, and Systemic Sudden Stops", analyzes the puzzling fact that emerging markets hold very high levels of international reserves and foreign liabilities simultaneously. Moreover, these holdings are positively correlated, which leads to an income loss that might reach 2% of GDP per year. To address this issue, I propose a new motive for international reserves accumulation, namely its role as implicit collateral for external borrowing. In this context, I evaluate whether the role of international reserves as collateral can explain the high levels of international reserves that we see in practice and find that the optimal level is close to the average reserves-to-GDP ratio in Latin American countries. Additionally, the optimal behavior during crises implies an increase of reserve holdings before a Sudden Stop and a small reduction during it, which is coherent with what was observed in the recent Global Financial Crisis. Finally, an alternative policy of keeping reserves at a constant level equal to its average value all the time yields very similar result to the optimal policy during sudden stops, highlighting the stabilizing role of reserves even if Central Banks don't use them at all. Chapter 3, "The Real Consequences of Countercyclical Capital Controls'', coauthored with Savitar Sundaresan, analyzes the effects of capital controls on real activity in Brazil, the most preeminent case of controls being imposed countercyclically. We find that capital controls have a significant negative impact on investment. The macro analysis uses a synthetic control method and finds that investment could have been approximately 20% higher if controls had not been put in place. The micro analysis uses a panel data approach and finds that the controls reduced the investment to assets ratio by as much as 40%, with some of its effects mitigated by the extension of subsidized credit by the government through the development bank. These results indicate that the renewed support for controls since the Great Financial Crisis should be more cautiously evaluated as it might harm the potential growth rate of Emerging Economies for a long-lasting period.

I study bailout policy in open economies and the relationship between openness and institutions. Chapter 1 studies jointly optimal bailout policy and monetary policy in open economies. I document that countries with larger foreign currency liability/GDP ratio before financial crises underwent larger currency devaluation, inflation and bailout in crises. I build a quantitative open economy model with both nominal rigidities and financial frictions. Using the model, I show that in a world without bailout while currency mismatch effect is present, larger foreign currency liability before crises calls for smaller currency devaluation in crises, embracing the notion of ``fear of floating''. The incorporation of optimal government bailout, whose cost needs to be financed by inflation tax, can overturn the above negative relationship between foreign currency liability and currency devaluation, delivering results consistent with the empirical findings. Finally, I use firm level data to show that whether firms suffer from currency mismatch effect or not during crises hinges on their chance of obtaining bailout. Chapter 2 examines the joint dynamics of private and public external debt for countries. We develop a model with the co-occurrence of banking crisis and sovereign debt crisis in open economies, formalizing Reinhart and Rogoff (2011) findings ``from financial crash to debt crisis". External interest rate spikes or sudden stop shocks force banks to cut down debt position and fire-sale capital. The existence of frictions in bank equity market creates incentives for the government to initiate a bailout. The government bails out banks by increasing external borrowing and implementing fiscal austerity to undo inefficiencies in the private sector. Under optimal bailout scheme, the model generates diverging external debt dynamics for the private sector and the government during a crisis, as we document in the European data. Finally, we investigate two rationales for ex-ante macro-prudential regulations on private external debt: fire-sale externalities between banks and moral hazard by banks.Chapter 3 (joint with Shang-Jin Wei) explores the relationship between openness and institutions. Quality of public institutions has been recognized as a crucial determinant of macroeconomic outcomes. We propose that a country's intrinsic level of openness (due to population size, geography, or exogenous trade opportunities) affects its incentives in investing in better institutions. We present a simple theory and extensive empirical evidence validating the role of intrinsic openness in determining institutional quality. This suggests an indirect but important channel for globalization to improve welfare by raising the quality of institutions.

Many scholars primarily view international organizations as vehicles used by powerful states to distribute resources. However, this view trivializes the profound influence of their day-to-day operations on the world. This dissertation argues that that the classification systems developed by these bureaucracies significantly affect how classified countries are treated by many influential elites in the global economy. Focusing on the domain of development, I show that whether a country is categorized as a developing country has major effects on high-stakes decisions such as aid, investment, and credit and democracy ratings. Why do international observers rely so heavily on these blunt categories? I propose two mechanisms by which classifications influence elite behavior: Elites may use classifications cognitively as heuristic devices that simplify decision-making processes or strategically as a way of justifying their behaviors to external audiences. I then show with cross-national data from 1987 to 2015 that a country's World Bank income classification correlates with the rewards it receives from actors who are susceptible to one or both of these mechanisms. Specifically, I find that becoming a middle income country causes a country to lose aid but receive better ratings of its creditworthiness and democracy. These findings are echoed in interviews with stakeholders in the graduation processes of several countries within a World Bank system. I test the micro-foundations of my theory with experimental data by inviting an elite sample of development professionals and students to participate in a hypothetical aid allocation activity. By randomizing the information included on the country profiles and the participation incentives, I show both that a classification effect exists and that, in the case of donors, it is primarily driven by the strategic mechanism. Coupled with the observational findings, which illustrate that classifications affect investors and raters with no such strategic incentives, this suggests that both mechanisms are essential to understanding who uses classifications. How do these dynamics affect the experiences and behaviors of classified countries and groups within those countries? I argue that classifications produce winners and losers, who strategically respond to their classifications when able and informed. In particular, being categorized as a more developed country punishes non-governmental organizations and those they represent, while business interests and individual leaders benefit materially and socially. I illustrate these patterns through dozens of interviews with representatives from civil society, the business community, and government in Nepal and Botswana, two countries that are currently or have previously "graduated" from the UN's Least Developed Country category. Moreover, I provide qualitative and quantitative evidence that countries use a variety of strategies to attempt to change their classifications, and they do so in both directions. For example, I show that countries manipulate their data as they approach significant thresholds that separate categories, and while some seek to accelerate their transition, others try to hinder it. This project identifies and explains a relatively unexamined power of international organizations in a context where its deployment significantly affects outcomes for developing countries. Classifications affect the highest level of interactions in ways that are felt by the poorest in society. As numerous countries begin to graduate from their developing country statuses, these findings are especially relevant for ongoing policy debates about how international organizations spread their understandings of development. Far from merely describing the world, these bureaucrats shape it in profound ways.

This dissertation contains three essays in International Macroeconomics. The first two chapters study clustered sovereign defaults, the default events where multiple countries default in a relatively short period of time. In spite of the fact that clustering of defaults is a recurring phenomenon, there is a lack of empirical as well as quantitative research focusing on clustered defaults. Therefore, the first two chapters try to uncover the the nature of shocks and the mechanism through which these shocks lead countries to clustered defaults. The first chapter uses the data on 146 sovereign defaults from 1975 to 2014 and categorizes one-third of these defaults as clustered default episodes. It then asks if the nature of shocks that drive clustered defaults differ from those that drive idiosyncratic defaults. I find that global variables, global shocks to transitory component of output of the countries and world interest rate fluctuations, play a crucial role in predicting clustered default events: for clustered default episodes, the predicted probability of default goes up by two-and-a-half times after the inclusion of global variables as explanatory variable. Idiosyncratic defaults, on the other hand, are not influenced by the presence of global variables as explanatory variable in the specification, and the predicted probability of default remains unchanged. Motivated by the finding of the first chapter, the second chapter builds a quantitative framework to study clustered defaults. The chapter begins with a joint estimation of structural parameters that drive the output process of 24 countries and a process for the world interest rate. The postulated output process includes transitory and permanent global components, as well as transitory and permanent country-specific components. I then build a sovereign default model augmented with financial frictions at the firm level. The model and the estimation process of driving forces are validated jointly when the shocks, estimated independently of the model or of default data, are fed into the model and the model reproduces the clustered default of 1982. The two main findings of the chapter are: (1) the primary driver of clustered defaults is global shock to the transitory component of output; and (2) contrary to what is commonly believed, the Volcker interest rate hike was not a decisive factor for the 1982 developing country debt crisis. The third chapter looks at one of the key financial frictions in emerging and poor economies—the presence of credit constrained households—and the way they affect consumption-to-output volatility ratio in these countries. A higher than one ratio of consumption-to-output volatility in emerging and poor countries is at odds with the observation that emerging and poor countries are also the countries where a big fraction of consumers do not have access to financial services. This is because consumers with no access to financial services cannot smooth consumption and can only have a consumption volatility to output volatility ratio of one. Therefore, in the presence of credit constrained households, the consumption volatility to output volatility ratio in the theoretical models should move closer to one rather than going up and away from one. This chapter, therefore, incorporates credit constrained households in an augmented real business cycle (RBC) model to study their effect on economic fluctuations in a set on 75 countries.

Today there is a great interest in the strategic markets or priority markets in the world. The list includes such countries as Brazil, China, Egypt, India, Kazakhstan, Mexico, Russia, Serbia, Turkey, Ukraine, USA, Vietnam. World find them priority because they hide a great potential and dispose of large amount of wealth, important for the future prosperous development of the whole world. It is clear that other economies that are not in the list, try to establish business relations with these countries and strengthen their positions on their markets. All BRIC countries are currently considered as the priority markets. In my work I tried to describe the current situation in the development of bilateral trade relations between the Czech republic and the BRIC countries. BRIC (Brazil, Russia, India, China) - a young forum of strengthening dialogue and cooperation with major countries among the dynamically developing countries, whose role in the global economy and politics is constantly increasing. During the last decade the BRIC countries became the "locomotive" of economic development in the world. Approximately 50% of world GDP growth in 2010, including the period after the crisis, was produced by BRIC countries. The Czech Republic is a relatively small economy, for which penetration to international trade plays an important role, and therefore for Czech exporters should BRIC markets become in the near term the main object of concentration.