The Journal of Economic Literature
Vol. 45, No. 4, December 2007
Contents
Capital Account Liberalization: Theory, Evidence, and Speculation
Peter Blair Henry
 Abstract
Research on the macroeconomic impact of capital account liberalization finds few, if
any, robust effects of liberalization on real variables. In contrast to the prevailing wisdom,
I argue that the textbook theory of liberalization holds up quite well to a critical
reading of this literature. Most papers that find no effect of liberalization on real variables
tell us nothing about the empirical validity of the theory because they do not
really test it. This paper explains why it is that most studies do not really address the
theory they set out to test. It also discusses what is necessary to test the theory and
examines papers that have done so. Studies that actually test the theory show that liberalization
has significant effects on the cost of capital, investment, and economic
growth.
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The Obstinate Passion of Foreign Exchange Professionals: Technical Analysis
Lukas Menkhoff and Mark P. Taylor
Abstract
Technical analysis involves the prediction of asset price movements from inductive
analysis of past movements. We establish a number of stylized facts, including that
technical analysis is widespread in the foreign exchange market and that it may be
profitable. We then analyze four arguments that have been put forward to explain
this: that the market may not be fully rational; that technical analysis may exploit the
influence of official interventions; that it may be an efficient form of information processing;
and that it may inform on nonfundamental influences. While each may have
some validity, the latter is the most plausible.
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Interesting Questions in Freakonomics
John DiNardo
Abstract
Freakonomics is more about "entertainment" than it is a serious attempt at popularization.
Consequently, rather than conduct a comprehensive fact check, I use the
book as a springboard for a broader inquiry into social science research and take
issue with the book's surprising premise that "Economics is a science with excellent
tools for gaining answers but a serious shortage of interesting questions." Using
examples from Freakonomics, I argue that some of the questions the book addresses
are "uninteresting" because it is impossible to even imagine what a good answer
would look like. I conclude with some thoughts about the role of economic theory in
generating interesting questions and/or answers.
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A True Development Round? A Review of Joseph E. Stiglitz and Andrew Charlton's Fair Trade for All: How Trade Can Promote Development
Robert Z. Lawrence
Abstract
In Fair Trade for All: How Trade Can Promote Development, Stiglitz and Charlton
prescribe what a multilateral trade agreement--that promotes development and is fair
for all--would include. This review appraises their prescriptions and offers some
alternatives. Many of their ideas about what developed countries should do (opening
markets, especially of labor intensive goods and services and cutting farm subsidies)
are quite familiar and sensible. More controversially, however, they propose that all
WTO members (both developed and developing) completely open their markets to all
developing countries poorer and smaller than themselves. They also stress the importance
of preserving domestic policy space, dropping intellectual property rules from
the WTO and keeping restrictive rules off the agenda. Among its criticisms of the book,
the review points out that the liberalization proposal contradicts their own arguments
favoring individually tailored policies in developing countries and is likely to maximize
trade diversion. In addition, their prescriptions for more policy space neglects
the more desirable possibility of a WTO in which members accept differentiated
commitments.
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Children in the Vanguard of the U.S. Welfare State: A Review of Janet Currie's The Invisible Safety Net and Jane Waldfogel's What Children Need
Eugene Smolensky
Abstract
Policy driven social science research intended to influence the future of the U.S.
welfare state has, during the past decade, emphasized improving the life-chances of
children, particularly children disadvantaged at birth by the socioeconomic status
of their parents. This essay samples that literature, discussing in detail the contents
and implications of two recent largely synthetic volumes from this genre.
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Book Reviews
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Annotated Listing of New Books
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JEL Classification System for Books
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Doctoral Dissertations in Economics
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General Index for Volume XLV
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