The Internet as an avenue for card-based commerce has seen something of a popularity explosion in recent years. In the UK alone, on-line shopping has become a multi-billion pound industry and in 2004 accounted for nearly 11 pence out of every £1 spent using credit cards. However, this particular form of commerce, typically referred to as Card Not Present1 (CNP) transactions, whilst commonplace, is currently far from secure.
A recent report by the Association for Payment Clearing Services (APACS) on card fraud showed that Internet-based CNP transactions accounted for 36% of all card fraud perpetrated in 2006 in the UK (up from 27% the previous year). This translated into £154.5 million in losses for card issuers and merchants. The proliferation of Internet-based commerce (and the increasing level of fraud associated with it) has resulted in a great deal of effort in developing protocols for securing these transactions. However, the vast majority of Internet-based payments are secured using a single protocol suite, namely SSL, to protect card account information.
One of the most established empirical regularities in international real business cycle (IRBC) analysis is the counter-cyclical behavior of net exports. In contrast, the behavior of imports and exports themselves has been largely neglected in the literature. They are much more volatile than GDP and both are pro-cyclical, facts which are at odds with the predictions of standard models. The large drop in the volume of world trade in 2008-2009 has attracted ample notice. But the drop in international trade is generally consistent with the patterns of cyclical trade movements we have seen over the past 35 years. This data lead us to expect a large drop in the volume of trade when markets experience a steep recession, especially if it is expected to be prolonged. Inspired by the evidence that a large fraction of international trade is in durable goods, we propose a two-country two-sector model, in which durable goods are traded across countries. Simulation results show that our model can match the trade sector data much better than standard models.
We first document two empirical findings that are very robust across our 25-OECD-country data: 1. The standard deviations of real imports and exports are about two to three times as large as that of GDP. 2. Real imports and exports are pro-cyclical and also positively correlated with each other. We label the first finding “trade volatility”, and the second one “positive comovement”. We also confirm in our dataset the well-documented negative correlation between net exports and output.
The world’s poorest countries are deeply ill. In the highly indebted poor countries (HIPCs) of the world, one in ten infants die at birth. For those who survive birth, life is an uphill battle. The unholy trinity of malaria, AIDS, and malnutrition conspire to deliver a life expectancy in the HIPCs of 51 years the average child born in Mozambique will be approaching his death bed as his counterpart in the United States enters middle age and the prime income earning years of his life. Nor do the HIPCs’ economies offer much hope of pulling its citizens out of grinding poverty anytime soon. Their average growth rate for the past 20 years has been negative things are getting worse, not better, for the indigent of the world.
Statistics such as these (see Table 1) are not easy to take. Civilized people find talk of death and destitution rather unpleasant. Something must be to blame, and the debt burden of the world’s poorest countries 169 billion dollars in 1999 is a highly visible target. There have always been those who think that the debts of the world’s poorest countries should be forgiven. But in 1996 debt relief advocates redoubled their efforts. Catalyzed by Bono, there is an increasingly popular view from NGOs to the Pope to Jesse Helms that the staggering level of debt is the primary obstacle to improved economic growth and living standards in the HIPCs.
