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Inflationary Burst and Free Fall of the Indonesian Economy during the Krismon Period -A Vicious Circle of Real and Monetary Aspects- (392KB) / Takao Fukuchi

The APEC Food System: Implications for Agricultural and Rural Development Policy (69KB) / John Gilbert, Robert Scollay, and Thomas Wahl

Short-Term Cycles in Primary Commodity Prices (41KB) / Walter C. Labys, Eugene Kouassi, and Michel Terraza

Credit Flowing from the Poor to the Rich: The Financial Market and the Role of the Grameen Bank in Rural Bangladesh (115KB) / Koichi Fujita

Incentives Embedded in Institutions: The Case of Share Contracts in Ghanaian Cocoa Production (111KB) / Tsutomu Takane

Book Reviews

Market Liberalism: American Foreign Policy toward China by Gordon C. K. Cheung (20KB) / Yoshifumi Nakai

Takao Fukuchi, "Inflationary Burst and Free Fall of the Indonesian Economy during the Krismon Period - A Vicious Circle of Real and Monetary Aspects -," pp. 257-307.

Indonesia experienced Krismon (severe economic crisis) after August 1997. Economic downfall and rapid inflation occurred during one year followed by additional stagnation for six months. Krismon was characterized by a short duration, interaction between political instability and economic downfall, and interrelation between collapse of real activities and severe inflation. First I estimated the exchange rate function based on normal period data, and interpreted the extrapolation error as noneconomic disturbance (or surrogate of political instability), and included it as an exogenous variable. Then I constructed a monthly model with 31 equations (1996-98), which included main real and monetary variables. In the final test, MAPE was controlled within 10 per cent after 36 months. Another simulation showed that the rapid growth of the economy could have continued based on the specific changes of exogenous variables. Thus, the model explained the causes and mechanism of Krismon, and also decomposed the GDP loss into several factors.

John Gilbert, Robert Scollay, and Thomas Wahl, "The APEC Food System: Implications for Agricultural and Rural Development Policy," pp. 308-329.

The APEC Food System (AFS) proposal is a new development in the area of APEC agricultural and food markets. It provides an excellent example of the comprehensive approach advocated by APEC, combining elements of both trade and investment liberalization and facilitation (TILF) and economic and technical cooperation ("Ecotech"). It is also a proposal that deals with one of the most controversial aspects of Asia-Pacific economic relations. We use the results of a recursive dynamic CGE model to provide a policy commentary on the AFS and its effect on the developing economies of APEC. The model is designed to capture the potential effects of agricultural reform on regional welfare and agricultural incomes. Although income distribution effects are likely to be problematic for APEC, the Ecotech components of the AFS may offer the potential to mitigate these effects, and allow APEC to realize the substantial positive net welfare gains of agricultural reform.

Walter C. Labys, Eugene Kouassi, and Michel Terraza, "Short-Term Cycles in Primary Commodity Prices," pp. 330-42.

Commodity price fluctuations have always been of importance to developing countries. While positive price swings have led to rising export earnings and domestic income growth, negative price swings have lowered income growth and disrupted related investment programs. Much of the research in this area has been directed to the instability problem, often without recognizing that the underlying price fluctuations might be cyclical and to a certain extent predictable. While previous studies have emphasized that commodity price movements have often led and sometimes caused major turns in business cycles, several studies have focused on the cyclical nature of commodity price movements themselves. Continuing in this direction, the purpose of this study is to further define the short-term cyclical nature of commodity prices. We thus begin by using the basic NBER chronology to determine the particular timing, frequency, and amplitude of price cycles. We then confirm the existence of such cycles by establishing statistical significance using the structural time series (STS) approach. Our conclusions discuss the periodicity of the cycles for different commodities and their implications for developing country policy making.

Koichi Fujita, "Credit Flowing from the Poor to the Rich: The Financial Market and the Role of the Grameen Bank in Rural Bangladesh," pp. 343-73.

Based on an intensive economic survey in two villages in Bangladesh, this paper investigates the structure of rural financial markets and the role of the Grameen Bank in that structure. Major findings include: (1) informal credit flows basically from the poor to the rich mainly in the form of long-term credit with land mortgaging; (2) trickle down effects of the Green Revolution and the development of off-farm job opportunities generate savings among the poor, which are circulated in informal financial channels; and (3) the Grameen Bank provided "advancements for future savings" among the poor and thus basically succeeded in poverty alleviation by encouraging hard work resulting in saving, not by promoting micro-enterprises per se. The Grameen Bank is basically effective for poor people who have fairly stable regular non-farm income sources; thus, it is not effective in helping the abject poor or economically backward rural areas.

Tsutomu Takane, "Incentives Embedded in Institutions: The Case of Share Contracts in Ghanaian Cocoa Production," pp. 374-97.

Providing price incentives to farmers is usually considered essential for agricultural development. Although such incentives are important, regarding price as the sole explanatory factor is far from satisfactory in understanding the complex realities of agricultural production in Africa. By analyzing the share contracts widely practiced in Ghana, this article argues that local institutions such as land tenure systems and agrarian contracts provide strong incentives and disincentives for agricultural production. Based on data derived from fieldwork in the 1990s, the study analyzes two types of share contracts and the incentive structures embedded in them. The analysis reveals that farmers' investment behavior needs to be understood in terms of both short-term incentive to increase yield and long-term incentive to strengthen land rights. The study concludes that the role of price incentives in agricultural production needs to be reconsidered by placing it in wider incentive structures embedded in local institutions.