Hot Money Flows,Cycles in Primary Commodity Prices,and Financial Control in Developing Countries

Because the U.S. Federal Reserve’s monetary policy is at the center of the world dollar standard, it has a first-order impact on global financial stability. However, except during international crises, the Fed focuses on domestic American economic indicators and generally ignores collateral damage from its monetary policies on the rest of the world. Currently, ultra-low interest rates on short-term dollar assets ignite waves of hot money into Emerging Markets (EM) with convertible currencies. When each EM central bank intervenes to prevent its individual currency from appreciating, collectively they lose monetary control, inflate, and cause an upsurge in primary commodity prices internationally. These bubbles burst when some accident at the center, such as a banking crisis, causes a return of the hot money to the United States (and to other industrial countries) as commercial banks stop lending to foreign exchange speculators. World prices of primary products then collapse. African countries with exchange controls and less convertible currencies are not so attractive to currency speculators. Thus, they are less vulnerable than EM to the ebb and flow of hot money. However, African countries are more vulnerable to cycles in primary commodity prices because food is a greater proportion of their consumption, and—being less industrialized—they are more vulnerable to fluctuations in prices of their commodity exports. Supply-side shocks, such as a crop failure anywhere in the world, can affect the price of an individual commodity. But joint fluctuations in the prices of all primary products—minerals, energy, cereals, and so on—reflect monetary conditions in the world economy as determined by the ebb and flow of hot money from the United States, and increasingly from other industrial countries with near-zero interest rates.     

量化宽松、财政赤字与美元资产安全

次贷危机爆发以来,美国采取了一系列货币和财政政策以拯救深陷泥潭的本国经济。美联储运用非常规政策工具向金融体系注入大量流动性资产,美联邦政府也大幅度提高了财政支出,使得财政赤字愈加恶化。在此背景下,美元资产的安全性成为投资者关注的焦点。本文分别从货币政策效果、财政赤字的可持续性以及投资主体等方面考察了美元资产的安全性,分析了美国宏观经济政策的实际作用,并从投资主体结构探讨了美国联邦政府的经济取向,最后以所涉及资产的市场表现回应美元资产安全问题。笔者认为,与其它货币资产相比,持有美元资产并不会承担额外的币种风险。     

货币政策组合规则

本文建议在泡沫高涨时将货币政策由利率规则转为货币量规则。在本文设定的CIA模型经济中，外生泡沫通过金融渠道对经济发生影响。本文证实，即使是遵循了泰勒原则的利率规则也会因为对融资活动的增长提供相应的货币支持而实际上起到助长泡沫经济的作用；而货币量规则由于对货币供应的控制而能起到缩短并稳定泡沫经济影响的效果。本文的模拟实验表明，在大型泡沫经济中将利率规则与货币量规则组合使用能取得更好的宏观经济成果。同时，将不同规则进行组合使用的思想在货币政策的研究中是新颖的，本文还发展了模型对接的技术处理方法。     

货币政策组合规则

本文建议在泡沫高涨时将货币政策由利率规则转为货币量规则。在本文设定的CIA模型经济中,外生泡沫通过金融渠道对经济发生影响。本文证实,即使是遵循了泰勒原则的利率规则也会因为对融资活动的增长提供相应的货币支持而实际上起到助长泡沫经济的作用;而货币量规则由于对货币供应的控制而能起到缩短并稳定泡沫经济影响的效果。本文的模拟实验表明,在大型泡沫经济中将利率规则与货币量规则组合使用能取得更好的宏观经济成果。同时,将不同规则进行组合使用的思想在货币政策的研究中是新颖的,本文还发展了模型对接的技术处理方法。     

MONETARY TARGETING IN WEST GERMANY,HOLLAND, AND SWITZERLAND

Links between fluctuations in domestic money supplies and subsequent fluctuations in rates of real output have been less visible in Western Europe than in the United States. This paper discusses some of the causes and investigates the stability of the demand for money in West Germany, the Netherlands and Switzerland. In all three countries, temporary changes in short-term interest rates temporarily affect the demand for money. These temporary changes in the demand for money are reflected in temporary blips in the monetary statistics, as agents substitute among various monetary assets. The hypothesis that aggregate demand responds only to longer-lasting changes in interest rates is tested by a two-step procedure. First, the official data on European money supplies are corrected for temporary disturbances caused by temporary changes in domestic interest rates. Second, changes in real activity are regressed on a measure of monetary stimulus, which takes into account the correction for temporary disturbances. This two-step procedure avoids some of the bias present in ordinary estimates of the demand-for-money function. The results show that the links between changes in money and subsequent changes in output are somewhat more tenuous in West Germany, the Netherlands, and Switzerland than in the U.S. but significant effects do exist. These effects are more easily documented when corrected time series for the European money supplies are used.     

VEHICLE CURRENCY*

Historically, the world economy has been dominated by a single currency accepted in the exchange of goods and assets among countries. In recent decades, the U.S. dollar has played this role. The dollar acts as a “vehicle currency” in the sense that agents in nondollar economies will generally engage in currency trade indirectly using the U.S. dollar instead of using direct bilateral trade among their own currencies. A vehicle currency is desirable when there are transactions costs of exchange. This article constructs a dynamic general equilibrium model of a vehicle currency. We explore the nature of the efficiency gains arising from a vehicle currency and show how it depends on the total number of currencies in existence, the size of the vehicle currency economy, and the monetary policy followed by the vehicle currency’s government. We find that there can be significant welfare gains to a vehicle currency in a system of many independent currencies. But these gains are asymmetrically weighted toward the residents of the vehicle currency country. The survival of a vehicle currency places natural limits on the monetary policy of the vehicle currency country.     

Money,inflation, and maximizing behavior: The case of many countries

This paper examines a world which is composed of countries each inhabited by a population of farsighted overlapping generations and in which the only assets are the national currencies that grow at constant proportional rates. It is shown that the world economy is unstable in the sense that, away from the steady state, either the real value of each country's stock of money goes to zero or the world monetary system eventually collapses. It is also shown that the dynamic paths of the price level and the real stock of money in each country may move nonmonotonically over time.     

CURRENCY SUBSTITUTION, U.S. MONEY DEMAND, AND INTERNATIONAL INTERDEPENDENCE

A number of writers have argued in recent years that massive international currency substitution has been a major cause of exchange rate volatility and monetary instability in the United States and other major countries. Such analysis is frequently coupled with recommendations for a return to pegged exchange rates. This paper critically examines the evidence presented for this currency substitution view. It argues that the weight of latest research suggests that direct international currency substitution has not been of major quantitative importance for the U.S. However, empirical evidence supports traditional views that international capital mobility can generate substantial short-run monetary interdependence even under flexible exchange rates. Thus, even though international currency substitution is of little importance to U.S. monetary conditions, a broader range of international considerations may be of considerable importance for the U.S. economy.     

Stock markets and the exchange rate: A multi-country approach

A general model of optimal choice over risky assets is used to derive an estimable exchange rate equation which is then applied to the German mark-U.S. dollar and Japanese yen-U.S. dollar exchange rates. Previous models which exclude equities find that government bond and/or money stocks have a weak effect on exchange rates, a result that is also found here. By contrast, equity values are shown to have a significant effect on the value of the German mark-U.S. dollar and Japanese yen U.S. dollar exchange rates over the period 1974 to 1988.     

人民币国际化与国际货币体系改革

从美国债务上限调整的议案及美国信贷主权评级的下调,可见现行由美元和欧元所组成的二元国际货币体系并不稳定。为测度出人民币的引入能否增加国际货币体系的稳定性,本文先建立面板回归模型分析影响一国货币国际化的基础条件因素,并在模型的基础上,测度出人民币在可自由兑换后将成为一个能与欧元相互抗衡的国际货币。通过方差比较,本文论证了由美元、欧元和人民币三种货币所组成的外汇储备组合较二元体系下的稳定,说明人民币国际化有助于改革现行的二元体系,使国际货币体系发展成为更稳定的三元体系,从而促进全球经济的健康发展。     

美元短期走势分析

目前美元仍是各国外汇储备持有的主要资产,美国的货币和资本市场是世界上最具广度和深度的成熟市场之一,在未来相当长的时期里,美元资产仍将是包括中国在内的各国政府和民间对外投资的主要组成部分。美元贬值与世界经济走势并非经济基本面因素所致,美元走弱还属于货币当局“可控制的贬值”。高油价及通货膨胀的困扰,次级债危机的冲击使本来就不明朗的美国经济前景更加暗淡,无论是从美国的国内经济还是国际经济的基本面来分析,美元短期贬值已是大势所趋,无可挽回了。     

Impact of foreign prices and interest rates on canadian economy under alternative monetary and exchange rate regimes

The main objective of this paper is to analyze the impact of U.S. short- and long-term monetary policy under both flexible and managed floating systems, using the new CANDIDE Model 2.0. We have also examined the role of domestic monetary policy in the Canadian economy under both fixed and flexible exchange rate systems. The following are some of the important findings of our study:

1. Our results support the traditional view that under the fixed exchange rate regime, monetary authorities cannot successfully pursue an independent monetary policy from its trading partners — an effort to increase money supply will be almost offset by increases in the balance of payments deficit. In contrast, in the flexible exchange rate regime, monetary policy is more effective in producing an increased growth in output and employment. However the increased output growth comes at the cost of higher prices induced by increased wages and a depreciation of the Canadian dollar.
2. Our results suggest that the impact of U.S. interest rates on investment, GNE, employment, productivity, and government debt is less severe in a pure floating exchange rate regime, compared to the managed floating system. However, the impact of U.S. interest rate policy on the Canadian inflation rate is worse in the case of flexible exchange rate regime. Even though real income and inflation are less favourable in both cases, our results indicate a trade-off between output growth and inflation.
3. Our results imply that under a pure floating monetary authorities can determine the long-run rate of inflation in Canada independent of others. However, the United States and Canadian economies are interrelated during the adjustment process, even under the flexible exchange rates, through the terms of trade and the wage-price spiral channels.

     

Eurocurrency interest rate linkages: A frequency domain analysis

We investigate relations between Eurocurrency interest rates using frequency domain methods, which permit us to decompose test statistics into short-term and long-term causality measures. We document significant linkages between international interest rates. Specifically, we show that the euro plays an increasingly important role in global money markets. In fact, a subperiod analysis suggests that the euro interest rate leads the US dollar rate during the recent financial crisis. We discuss the implications of the findings for understanding global monetary policy dynamics as well as modeling and forecasting of short-term interest rates.     

Disinflation costs in China and monetary policy regimes

This paper investigates the real effects of a disinflationary policy in China, in which we conduct a disinflation experiment in a medium-scale New Keynesian model. We highlight two key features of China's economy: the relevance of money to monetary policy rules and household inequality. For the former, we consider two monetary policy regimes: an expanded Taylor rule with money and a money supply rule. For the latter, we take into account a share of the population that is limited in its ability to participate in assets markets. Our analysis suggests that a disinflation policy is more costly when the central bank controls the money supply than the case in which the nominal interest rate is the policy instrument. Our results are driven by the different impacts of disinflation on nominal and real interest rates under the two regimes.     

中美货币政策变动与国内资产价格调控

后金融危机时代,美国持续量化宽松货币政策所带来的溢出效应已对中国资产价格调整产生实质性影响;美国货币政策变动后可通过利率和国际资本流入进行传导,能直接引起中国股票市场价格的剧烈波动并间接推动房地产价格的上涨;在中国房地产市场正处于深度调控背景下,美国货币政策的进一步放宽将对中国货币政策的适度紧缩形成强烈制约,使中国资产价格调控面临巨大的风险和隐患。     

后危机时期国际金融格局的变动及其对美国经济的影响

2008年金融危机给世界经济带来了重大的影响,国际金融格局也发生了显著变化。本文主要分析了国际汇率体系、国际收支和国际储备体系、国别经济政策与国际间经济政策协调的变化。在后危机时期,美国经济也受国际金融格局变化的影响,包括美元中心地位的问题、“中心一外围”模式可持续性的问题和美国的国际经济领导权问题。本文得出的主要结论是：国际几种主要货币汇率波动增大,国际汇率体系弹性增大,国际收支总体失衡程度下降,美元为主的国际储备体系呈多元化趋势,先进经济体与新兴发展经济体的经济协调在加强,美元的霸权地位面临挑战,美国在国际分工中的中心地位在下降,美国在国际经济的主导地位也在逐渐下降,新兴经济体获得更多的话语权。     

FEDERAL BUDGET DEFICITS, MONEY, AND EXCHANGE RATES

The dollar's strength during the 1980s appears to many—particularly as reported in the financial press—to have been directly linked to the decade's large budget deficits and the subsequent increase in the stock of federal debt outstanding. The popular argument is that the budget deficit and the growth of federal government credit market demand caused U.S. interest rates to rise over that period, inducing large capital inflows from abroad to finance the deficit. According to the argument, the capital inflows caused the dollar to appreciate. Despite the argument's popularity, the empirical literature does not strongly support it. Evidence on the relationship between the federal deficit and the dollar is at best mixed.
This article reconsiders the effects of federal budget deficits on the exchange rate. The analysis involves estimating a vector autoregressive (VAR) model of exchange rates that includes monetary, fiscal, and price level variables. Within the VAR framework, impulse analysis traces the dynamic response of exchange rates to various budget deficit measures.
The analysis finds that deficits do not directly Granger cause exchange rates, but it also finds evidence of an indirect effect working through the money supply and price level. Moreover, the analysis reveals some evidence that foreign exchange markets are forward looking and react to expected budget deficits. The innovations accounting and impulse analysis also suggest a forward-looking dynamic relationship between deficits and exchange rates, but the relationship is sensitive to the ordering of the variables.     

Exchange Rate Determination: An Application of a Monetary Model for Brazil

The goal of this paper is to test a variant of the monetary exchange rate determination model, described by Obstfeld and Rogoff (1996), for the Brazilian economy in the recent period. The model starts with the Cagan (The Journal of Political Economy, 66(4):303–328, 1958) money demand, which is complemented by the hypotheses of purchase power parity (PPP) and uncovered interest parity (UIP). We used monthly data of exchange rate, GDP, interest rate for Brazil, and U.S. interest rate and inflation as proxies for international variables. We applied cointegration tests to identify a long run relationship among the variables. The estimated error correction model offers an exchange rate determination model in the short run. Due to potential endogeneity of some variables, GMM was applied to estimate a long-run model of exchange rate determination. The forecasting results of both estimatives were compared with a random walk approach. The results point to the existence of a long and short run equilibrium Real/dollar exchange rate using the structural model, which may be the achievement of this paper.     

Business cycle,interest rate and money in the euro area: A common factor model

In this paper we model and analyze the contemporaneous correlation between interest rate, monetary aggregates, production and prices (of consumer goods, financial assets and real estate) of the euro area. To do this, firstly we estimate a common cyclical factor by means of an unobserved component model with the common factor located in variations in the underlying growth rates, that is, accelerations and decelerations of the variables. The variables mentioned share a significant cyclical factor being all procyclical except for narrow money. Finally we offer an explanation of this empirical finding based on the monetary policy strategy of interest rate pegging followed by the European Central Bank. In this regard, the shared cyclical information suggests (a) that inflation should be considered as a phenomenon that affects the whole economy, and therefore all prices, and (b) that monetary indicators such as monetary aggregates may contribute to the assessment of inflationary risks throughout the cycle.