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The vast majority of the world's poorest households depend on farming for their livelihoods. During the 1960s and 1970s, most developing countries imposed pro-urban and anti-agricultural policies, while many high-income countries restricted agricultural imports and subsidized their farmers. Both sets of policies inhibited economic growth and poverty alleviation in developing countries. Although progress has been made over the past two decades to reduce those policy biases, many trade- and welfare-reducing price distortions remain between agriculture and other sectors and within the agricultural sector of both rich and poor countries. Comprehensive empirical studies of the disarray in world agricultural markets appeared approximately 20 years ago. Since then, the Organisation for Economic Co-operation and Development has provided estimates each year of market distortions in high-income countries, but there have been no comparable estimates for the world's developing countries. This volume is the third in a series (other volumes cover Asia, Europe's transition economies, and Latin America and the Caribbean) that not only fills that void for recent years but extends the estimates in a consistent and comparable way back in time—and provides analytical narratives for scores of countries that shed light on the evolving nature and extent of policy interventions over the past half-century. 'Distortions to Agricultural Incentives in Africa' provides an overview of the evolution of distortions to agricultural incentives caused by price and trade policies in the Arab Republic of Egypt plus 20 countries that account for about of 90 percent of Sub-Saharan Africa's population, farm households, agricultural output, and overall GDP. Sectoral, trade, and exchange rate policies in the region have changed greatly since the 1950s, and there have been substantial reforms since the 1980s. Nonetheless, numerous price distortions in this region remain, others have been added in recent years, and there has also been some backsliding, such as in Zimbabwe. The new empirical indicators in these country studies provide a strong evidence-based foundation for assessing the successes and failures of the past and for evaluating policy options for the years ahead.

Liberia's experience with a dual currency regime, with the U.S. dollar enjoying legal tender status, dates to its founding as a sovereign country in 1847. Following the end of the most recent episode of civil war in late-2003, the new government has expressed interest in strengthening the role of the Liberian dollar. Liberia, however, is heavily dollarized, with the U.S. dollar estimated to account for about 90 percent of money supply. Cross-country experience suggests that dollarization does not preclude monetary policy from achieving its primary objective of price stability, and that successful and lasting dedollarization may be difficult to achieve.

Previous studies that assessed the impact of exchange rate changes on a country’s inpayments and outpayments assumed that such effects are symmetric. The evidence from the literature reveals that import and export prices react to exchange rate changes in an asymmetric manner. This implies that export earnings and payments for imports should also react to exchange rate changes in an asymmetric manner. We demonstrate this by using Shin et al.’s (2014) nonlinear ARDL approach and inpayments and outpayments of the U.S. with her 15 trading partners. We find evidence of short-run as well as long-run asymmetric effects in more than half of the models, though the findings are found to be partner specific.

Distortions to Agricultural Incentives in Latin America provides an overview of the evolution of distortions to agricultural incentives caused by price and trade policies in five economies of South America plus the Dominican Republic, Nicaragua, and Mexico. Together these countries comprise about 80 percent of the region’s population, agricultural output, and overall GDP. The new empirical indicators in these country studies provide a strong evidence-based foundation for assessing the successes and failures of the past and for evaluating policy options for the years ahead.

The inverse relationship between the value of U.S. dollar and that of gold is one of the most talked about relationships in currency markets. The present study is an attempt to understand the impact of recession of 2008 on relationship between exchange rate of US dollar in INR and gold prices in India. The study uses Johansen Co- Integration test to check the long term association between exchange rate of US dollar in INR and gold prices in India and it further uses the Granger Causality Test to check the lead lag relationship between the variables. A separate pre, during and post recession analysis of the variables is done to understand the impact of recession on this relationship. The study highlights how this relationship has changed since the global turmoil.

While economic growth in developing countries over the last ten years has lifted more people out of poverty than in any previous time, more than one billion people still live in countries affected by violent conflict. Conflict weakens governance, undermines economic development and threatens both national and regional stability. Trade shocks, in particular, can have widely varying impacts on conflict. This report sets out to empirically test these linkages between trade shocks and conflict via cross-country and intra-country analysis. On the basis of the analysis, it offers trade-related policy directions to reduce this risk in fragile economies. The results provide convincing evidence that trade and trade policy have a large impact on the risk and intensity of conflict. This report is composed of three main chapters. Chapter 1 develops a conceptual framework mapping the different channels through which trade may affect conflict and political stability. The framework is based on simple economic theory and the available empirical evidence on the impact of trade related changes on conflict and stability. It then tests this framework empirically through the analysis of cross-country data and through case studies of Nigeria and the Israeli-Palestinian conflict. The hope is that these types of intra-country analyses could be replicated in other countries, since they use data that are available in different countries, especially in sub-Saharan Africa. Chapter 2 uses the same conceptual framework to show how differences in underlying conditions affect the relationship between trade-related changes and conflict. Following a review of the literature on the drivers of conflict, it examines the importance of four groups of grievances: conditions in neighboring countries, factors increasing grievance, government institutions, and policies that affect the transmission of changes in international prices to the domestic market. These relationships are tested using cross-country data and case studies of Nigeria and the Israeli-Palestinian conflict. Finally, chapter 3 uses the existing evidence, as well as evidence generated in this report, to discuss how the policies governing trade can reduce the probability and intensity of conflicts. Two appendixes include detailed information on the modeling framework, the data issues and the estimation results.

African exporters suffer from low survival rates on international markets. They fail more often than others, incurring time and again the setup costs involved in starting new relationships. This high churning is a source of waste, uncertainty, and discouragement. However, this trend is not inevitable. The high “infant mortality” of African exports is largely explained by Africa’s low-income business environment and, once properly benchmarked, Africa’s performance in terms of exporter failure is no outlier. Moreover, African exporters show vigorous entrepreneurship, with high entry rates into new products and markets despite formidable hurdles created by poor infrastructure, landlocked boundaries for some, and limited access to major sea routes for others. African exporters experiment a lot, and they frequently pay the price of failure. What matters for policy is how to ensure that viable ventures survive.Research carried out for this book demonstrates that governments can and should help to reduce the rate of failure of African export ventures through a mixture of improvements in the business environment, as well as well-targeted proactive interventions. The business environment can be made more conducive to sustainable export entrepreneurship through traditional policy prescriptions such as reducing transportation costs, facilitating trade through better technology and workflow in border management, improving the effectiveness of banking regulations to ensure the availability of trade finance, and striving for regulatory simplicity and coherence. In addition, governments can help leverage synergies between exporters. Original research featured in this book shows that African exporters improve each other's chances of survival when a critical mass of them penetrates a given market together. They also benefit from diaspora presence in destination markets. With adequate donor support and private-sector engagement, export-promotion agencies and technical-assistance programs can help leverage those synergies.

The intention of the spread trader is to implement a position that will reflect changes in the price difference between contracts rather than changes in outright price levels. To achieve such a trade, the two legs of a spread must be equally weighted. Although for most for most intramarket and intermarket spreads, equal weighting simply implies an equal number of contracts long and short, for intercommodity spreads, which can differ significantly both in contract size and price levels, the most sensible definition for equal weighting is a spread that is indifferent to equal percentage price changes in both markets. It can be demonstrated this condition will be fulfilled if the spread is initiated so the dollar values of the long and short positions are equal. An equal dollar value spread can be achieved by using a contract ratio that is inversely proportional to the contract value ratio. if intercommodity spreads are traded using an equal‐dollar‐value approach—as they should be—the price difference between the markets is no longer the relevant subject of analysis. Rather, such an approach is most closely related to the price ratio between the two markets. This fact means that for intercommodity spreads, chart analysis and the definition of historical ranges should be based on the price ratio, not the price difference.

This study uses the option valuation framework to identify and investigate the factors affecting the cross-sectional difference in individual corporate bonds' default risk. The dollar value of default risk (DVDR) is measured by subtracting the observed trading price of a risky corporate bond from a Cox-Ingersoll-Ross model value of a corresponding pseudo-default-free bond. From an option pricing perspective, DVDR can be modeled as the value of a put option on the firm's risky assets. The DVDR of an individual investment-grade corporate bond is hypothesized to be related to the bond rating, time to maturity of the bond, size of the issuing firm, volatility of firm value, and dividend yield of the issuing firm. In the case of the first four factors, the empirical results are consistent with the predictions from a put option perspective. There is a mixed relationship between DVDR and dividend yield, however, which provides a weaker support for the prediction of the option valuation model. Such a mixed relationship documents the important role that dividend payments play in signaling a firm's future earnings and reducing overall agency costs. [\"In particular, the formula can be used to derive the discount that should be applied to a corporate bond because of the possibility of default.\" (Black and Scholes (1973), Journal of Political Economy, Abstract, p. 637.)] [PUBLICATION ABSTRACT]