THE RELATIONSHIP BETWEEN THE BLACK MARKET AND OFFICIAL EXCHANGE RATES: AN EXAMINATION OF LONG-RUN DYNAMICS IN INDIA

This study is the first to use Johansen's cointegration approach for India in the analysis of the long‐term dynamics between the black and official exchange rates for the period 1953–1993. The study also estimates the long‐run elasticity of the official rate with respect to the black market rate. As monthly data over 40 years are used, and a more robust methodology is employed, the results are likely to be more reliable as compared with the earlier work on India. The results of our study suggest that while there is a long‐term relationship between the two rates, the direction of causality is from the black rate to the official exchange rate. This is plausible in the Indian context where policy has generally lagged behind events in the black market. The hypothesis of a constant black market premium is rejected, implying that there is a mismatch between the percentage change in the official exchange rate and the percentage change in the black market rate.     

ASIAN REAL EXCHANGE RATES AND OIL PRICES: A COINTEGRATION ANALYSIS UNDER STRUCTURAL BREAKS

We examine the long‐run relationship between Asian real exchange rates and oil prices in the presence of structural breaks. The relevance of considering breaks is demonstrated by utilizing the Johansen et al. procedure that allows for up to two predetermined breaks. Using conventional tests that do not consider breaks reveals no evidence of cointegration. However, the Johansen et al. procedure clearly demonstrates the importance of considering breaks and provides strong support for a stable long‐run relationship in all but Japan and the Philippines. Moreover, the results suggest evidence of bi‐directional causality in Malaysia and Thailand, uni‐directional causality from exchange rates to oil prices in Korea, the Philippines, and Singapore, uni‐directional causality from oil prices to the exchange rate in Indonesia, and no evidence of causality in Japan.     

THE PARALLEL MARKET IN CENTRALLY PLANNED ECONOMIES

This paper presents some general-equilibrium models of the parallel market in centrally planned economies. The models are based on the hypotheses that private firms can operate more efficiently than bureaucratically-run state enterprises and that Soviet-type economies are characterized by price controls and quantitative allocations. The state's enforcement policy is explicitly modeled. Although the welfare implications of the parallel market for workers are ambiguous in general, under a variety of circumstances they turn out to be negative. For instance, responding to the shortage created by price controls, illegal firms divert resources from the official economy into the parallel market. The result is a higher price in the parallel market without any increase in the total supply of the good.     

OCCUPATIONAL AND INDUSTRY SPECIFICITY OF HUMAN CAPITAL IN THE BRITISH LABOUR MARKET

This paper builds on the recent literature on the importance of occupational and industry experience on wages and extends Kambourov and Manovskii's (2002) study using British data. Occupational experience is estimated to make a significant contribution to wage growth, while the evidence on industry specificity is not very supportive. The second contribution of the paper is that it assesses whether there is heterogeneity in the estimated returns to work experience across one-digit industries and occupations. The findings suggest that industry and occupational experience is important for individuals in professional and managerial jobs or jobs in the banking and finance sector.     

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.     

中国省际资本流动规模实证研究

基于市场交易中资金与货物流向相反的逻辑,以地区货物和服务净流出减去其净出口的相反数来测算中国省际资本流动的规模,并分析其制度成因。结果表明:1980—2008年东部为资本净流入地区,中部为资本净流出地区,而西部则为持续的资本净流出地区;在东部地区内,京津冀为资本净流入地区,长三角和珠三角为资本净流出地区。资本跨地区流动的制度成因在于地方政府行为生成的内生交易费用差异,因而地区产业投资环境建设的重点在于持续降低当地的内生交易费用。在推进区域产业转移和产业升级过程中,可置信的保护产权的承诺等良好的公共治理对于改善地区投资环境必不可少。     

INTEREST RATE RULES AND WELFARE IN OPEN ECONOMIES

This paper analyses the welfare performance of a set of five alternative interest rate rules in an open economy stochastic dynamic general equilibrium model with nominal rigidities. A rule with a lagged interest rate term, high feedback on inflation and low feedback on output is found to yield the highest welfare for a small open economy. This result is robust across different degrees of openness, different sources of home and foreign shocks, alternative foreign monetary rules and different specifications for price-setting behaviour. The same rule emerges as both the Nash and cooperative equilibria in a two-country version of the model.     

EMPIRICAL TESTS OF MEAN REVERSION IN REAL EXCHANGE RATES: A SURVEY

Since the development of cointegration and unit root tests, these procedures have been applied widely to the relationship between nominal exchange rates and relative prices. The findings vary considerably for different time periods, exchange rate regimes and test procedures. These results have not previously been the subject of a comprehensive survey or evaluation. Suggestions are offered for the future development of research in this area.