Ricardo Hausmann
Encyclopedia
Ricardo Hausmann is a former Venezuela
n Minister of Planning and Head of the "Presidential Office of Coordination and Planning" (1992–1993) and current Director of Harvard's Center for International Development and a Professor of the Practice of Economic Development at John F. Kennedy School of Government
at Harvard University
.
. Before coming to Harvard in 2000, he served as the first Chief Economist of the Inter-American Development Bank
(1994–2000), where he created the Research Department. He has served as Minister of Planning of Venezuela (1992–1993) and as a member of the Board of the Central Bank of Venezuela
. He also served as Chair of the IMF-World Bank Development Committee. He was Professor of Economics at the Instituto de Estudios Superiores de Administracion
(IESA) (1985–1991) in Caracas, where he founded the Center for Public Policy.
and Ricardo Hausmann. In that setting the authors defined original sin as "a situation in which the domestic currency is not used to borrow abroad or to borrow long-term even domestically" (p. 330). In other words, a poor country is forced to borrow funds dominated in terms of a major foreign currency (i.e., the U.S. dollar, the euro, or the yen). If the borrowing country's domestic currency depreciates, the loan will become more difficult to pay back because their currency is worth less relative to the loan. Original sin can be divided into two parts: international original sin and domestic original sin.
Barry Eichengreen, Ricardo Hausmann and Ugo Panizza focused on the international component of original sin and, using Bank of International Settlement (BIS) data on outstanding international securities, showed that the great majority of these securities are denominated in five currencies (US Dollar, Euro, Yen, Swiss Franc, and British Pound) and that this situation is not due to the fact the residents of the countries that issue these five currencies also issue most of the international bonds.
The same authors argued that international original sin has serious consequences. If a country affected by original sin
has net foreign debt, then this country is likely to have a currency mismatch in its national balance sheet and large swings in the real exchange rate will have an effect on aggregate wealth and affect a country's ability to service its debt. As a consequence, original sin tends to make debt riskier, increase volatility, and affect a country's ability to conduct an independent monetary policy.
When they studied the causes of original sin, Barry Eichengreen, Ricardo Hausmann and Ugo Panizza found that country size is the only variable that is robustly correlated with original sin. Surprisingly, they found no significant correlation between original sin and several variables aimed at capturing economic and institutional development, lack of monetary credibility, and fiscal profligacy.
is a network of products introduced together with Cesar Hidalgo and Bailey Klinger. The Product Space
can be used as a Map for industrial development. In a recent publication Hausmann and others explain the idea of The Product Space using the following analogy:
Think of a product as a tree and the set of all products as a forest. A country is composed of a collection of firms, i.e., of monkeys that live on different trees and exploit those products. The process of growth implies moving from a poorer part of the forest, where trees have little fruit, to better parts of the forest. This implies that monkeys would have to jump distances, that is, redeploy (human, physical, and institutional) capital toward goods that are different from those currently under production. Traditional growth theory assumes there is always a tree within reach; hence, the structure of this forest is unimportant. However, if this forest is heterogeneous, with some dense areas and other more-deserted ones, and if monkeys can jump only limited distances, then monkeys may be unable to move through the forest. If this is the case, the structure of this space and a country’s orientation within it become of great importance to the development of countries.
Venezuela
Venezuela , officially called the Bolivarian Republic of Venezuela , is a tropical country on the northern coast of South America. It borders Colombia to the west, Guyana to the east, and Brazil to the south...
n Minister of Planning and Head of the "Presidential Office of Coordination and Planning" (1992–1993) and current Director of Harvard's Center for International Development and a Professor of the Practice of Economic Development at John F. Kennedy School of Government
John F. Kennedy School of Government
The John F. Kennedy School of Government at Harvard University is a public policy and public administration school, and one of Harvard's graduate and professional schools...
at Harvard University
Harvard University
Harvard University is a private Ivy League university located in Cambridge, Massachusetts, United States, established in 1636 by the Massachusetts legislature. Harvard is the oldest institution of higher learning in the United States and the first corporation chartered in the country...
.
Career
Hausmann earned a Bachelor's degree in Engineering and Applied Physics (1977) and a PhD in Economics (1981) at Cornell UniversityCornell University
Cornell University is an Ivy League university located in Ithaca, New York, United States. It is a private land-grant university, receiving annual funding from the State of New York for certain educational missions...
. Before coming to Harvard in 2000, he served as the first Chief Economist of the Inter-American Development Bank
Inter-American Development Bank
The Inter-American Development Bank is the largest source of development financing for Latin America and the Caribbean...
(1994–2000), where he created the Research Department. He has served as Minister of Planning of Venezuela (1992–1993) and as a member of the Board of the Central Bank of Venezuela
Central Bank of Venezuela
The Central Bank of Venezuela is the central bank of Venezuela. It maintains a fixed exchange rate for the Venezuelan bolívar.-External links:*...
. He also served as Chair of the IMF-World Bank Development Committee. He was Professor of Economics at the Instituto de Estudios Superiores de Administracion
Instituto de Estudios Superiores de Administración
The Instituto de Estudios Superiores de Administración is a private non-profit Venezuelan business school with campuses in Caracas, Maracaibo and Valencia. It was founded in 1965...
(IESA) (1985–1991) in Caracas, where he founded the Center for Public Policy.
Original Sin
The expression Original Sin was first used in international finance in a 1999 article by Barry EichengreenBarry Eichengreen
Barry Eichengreen is an American economist who holds the title of George C. Pardee and Helen N. Pardee Professor of Economics and Political Science at the University of California, Berkeley, where he has taught since 1987...
and Ricardo Hausmann. In that setting the authors defined original sin as "a situation in which the domestic currency is not used to borrow abroad or to borrow long-term even domestically" (p. 330). In other words, a poor country is forced to borrow funds dominated in terms of a major foreign currency (i.e., the U.S. dollar, the euro, or the yen). If the borrowing country's domestic currency depreciates, the loan will become more difficult to pay back because their currency is worth less relative to the loan. Original sin can be divided into two parts: international original sin and domestic original sin.
Barry Eichengreen, Ricardo Hausmann and Ugo Panizza focused on the international component of original sin and, using Bank of International Settlement (BIS) data on outstanding international securities, showed that the great majority of these securities are denominated in five currencies (US Dollar, Euro, Yen, Swiss Franc, and British Pound) and that this situation is not due to the fact the residents of the countries that issue these five currencies also issue most of the international bonds.
The same authors argued that international original sin has serious consequences. If a country affected by original sin
Original Sin (economics)
Original sin is a commonly used metaphor in economics literature. It was proposed by Barry Eichengreen, Ricardo Hausmann, and in a series of papers to refer a situation in which "most countries are not able to borrow abroad in their domestic currency."...
has net foreign debt, then this country is likely to have a currency mismatch in its national balance sheet and large swings in the real exchange rate will have an effect on aggregate wealth and affect a country's ability to service its debt. As a consequence, original sin tends to make debt riskier, increase volatility, and affect a country's ability to conduct an independent monetary policy.
When they studied the causes of original sin, Barry Eichengreen, Ricardo Hausmann and Ugo Panizza found that country size is the only variable that is robustly correlated with original sin. Surprisingly, they found no significant correlation between original sin and several variables aimed at capturing economic and institutional development, lack of monetary credibility, and fiscal profligacy.
The Product Space
The Product SpaceThe Product Space
The Product Space is a network that formalizes the idea of relatedness between products traded in the global economy. The network first appeared in the July 2007 issue of Science in the article "The Product Space Conditions the Development of Nations," written by César Hidalgo, Bailey Klinger,...
is a network of products introduced together with Cesar Hidalgo and Bailey Klinger. The Product Space
The Product Space
The Product Space is a network that formalizes the idea of relatedness between products traded in the global economy. The network first appeared in the July 2007 issue of Science in the article "The Product Space Conditions the Development of Nations," written by César Hidalgo, Bailey Klinger,...
can be used as a Map for industrial development. In a recent publication Hausmann and others explain the idea of The Product Space using the following analogy:
Think of a product as a tree and the set of all products as a forest. A country is composed of a collection of firms, i.e., of monkeys that live on different trees and exploit those products. The process of growth implies moving from a poorer part of the forest, where trees have little fruit, to better parts of the forest. This implies that monkeys would have to jump distances, that is, redeploy (human, physical, and institutional) capital toward goods that are different from those currently under production. Traditional growth theory assumes there is always a tree within reach; hence, the structure of this forest is unimportant. However, if this forest is heterogeneous, with some dense areas and other more-deserted ones, and if monkeys can jump only limited distances, then monkeys may be unable to move through the forest. If this is the case, the structure of this space and a country’s orientation within it become of great importance to the development of countries.
Previous assignments
- First Chief Economist of the Inter-American Development BankInter-American Development BankThe Inter-American Development Bank is the largest source of development financing for Latin America and the Caribbean...
(1994–2000)- Created a Research Department
- Minister of Planning in VenezuelaVenezuelaVenezuela , officially called the Bolivarian Republic of Venezuela , is a tropical country on the northern coast of South America. It borders Colombia to the west, Guyana to the east, and Brazil to the south...
(1992–1993)- Member of the Board of the Central Bank of Venezuela
- Chair of the International Monetary FundInternational Monetary FundThe International Monetary Fund is an organization of 187 countries, working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world...
-World BankWorld BankThe World Bank is an international financial institution that provides loans to developing countries for capital programmes.The World Bank's official goal is the reduction of poverty...
Development Committee - Professor of Economics at the Instituto de Estudios Superiores de AdministracionInstituto de Estudios Superiores de AdministraciónThe Instituto de Estudios Superiores de Administración is a private non-profit Venezuelan business school with campuses in Caracas, Maracaibo and Valencia. It was founded in 1965...
(IESA) (1985–1991) in Caracas- Founded the Center for Public Policy