Exchange Rate Regime and Demand for Reserves: Evidence from Kenya,Mexico and Philippines

This paper empirically investigates the demand for international reserves (and foreign exchange reserves) during fixed and floating exchange rates periods in three developing countries: Kenya, Mexico and Philippines. Based on theoretical models, three factors are identified as important for the demand of international reserves and foreign reserves: average propensity to import, volume of imports and variability of reserves. The paper employs the cointegration methodology and error correction method to investigate the relationships. Cointegration tests results indicate a reliable long-run stationary relationship between the international reserves (and foreign exchange reserves) and the stated explanatory variables across countries and sub-periods of fixed and clean float. The error correction results indicate causality from the explanatory variables to the reserves during both the short and long run. This is true during both the fixed and the floating periods.

Fiscal limits and sovereign default risk in Japan

It is widely known that Japan has the highest debt-to-GDP ratio among OECD countries. If Japan’s national debt continues to balloon, fiscal crisis may occur in the future. This paper develops a closed economy model with defaultable government debt and conducts a simulation to investigate future sovereign debt risk.First, we estimate the fiscal limit which is defined as the sum of the discounted maximum fiscal surplus in all future periods. It is assumed that a partial default occurs when the amount of government debt exceeds the fiscal limit. We calculate the revenue-maximizing tax rate at the peak of the Laffer curve to derive the fiscal limit. As a result, the estimated average fiscal limit in Japan is much higher than that in Greece. In the Japanese economy, households are more patient and desire greater savings from greater discount factor derived from a lower real interest rate. Household saving habits support government bonds. This is the main reason why the Japanese government could have had a massive debt in addition to some room to raise the tax rate. Second, we simulate the model, using the estimated fiscal limit and non-linear computational methods. If the government debt-to-GDP ratio continues to increase for the next 20 years, the default probability will be over 10% and the sovereign risk premium will be approximately 2%. Furthermore, the default probability will reach approximately 80% and the sovereign risk premium will be 10% 30 years later.     

Optimal currency shares in international reserves: The impact of the euro and the prospects for the dollar

Foreign exchange reserve accumulation has risen dramatically in recent years. The introduction of the euro, greater liquidity in other major currencies, and the rising current account deficits and external debt of the United States have increased the pressure on central banks to diversify away from the US dollar. A major portfolio shift would significantly affect exchange rates and the status of the dollar as the dominant international currency. We develop a dynamic mean-variance optimization framework with portfolio rebalancing costs to estimate optimal portfolio weights among the main international currencies. Making various assumptions on expected currency returns and the variance–covariance structure, we assess how the euro has changed this allocation. We then perform simulations for the optimal currency allocations of four large emerging market countries (Brazil, Russia, India and China), adding constraints that reflect a central bank's desire to hold a sizable portion of its portfolio in the currencies of its peg, its foreign debt and its international trade. Our main results are: (i) The optimizer can match the large share of the US dollar in reserves, when the dollar is the reference (risk-free) currency. (ii) The optimum portfolios show a much lower weight for the euro than is observed. This suggests that the euro may already enjoy an enhanced role as an international reserve currency (“punching above its weight”). (iii) Growth in issuance of euro-denominated securities, a rise in euro zone trade with key emerging markets, and increased use of the euro as a currency peg, would all work towards raising the optimal euro shares, with the last factor being quantitatively the most important. J. Japanese Int. Economies 20 (4) (2006) 508–547.     

欧洲主权债务危机的内生性与外生性研究

南欧成员国社会福利过度造成的财政支出扩张与经济停滞导致的财政收入收缩是欧洲主权债务危机的内生性成因。美国因素是欧洲主权债务危机的重要外生性解释变量。美国试图通过债务危机打压欧元是为了巩固美元的全球霸权。即使欧洲主权债务危机在短期内对于欧元产生了一定的冲击,但在长期仍有可能造就一个更强大的欧元。     

Impacts of an international bridge on households: Evidence from Thailand

This paper empirically investigates the impacts of an international bridge between Thailand and Laos on households in Thailand. Based on the significance of agricultural sectors near the bridge, we investigate how its effect on household income differs between agricultural households and other types of households. We found that the bridge increased the income of agricultural households with agricultural land, especially those near the bridge. In contrast, agricultural households without agricultural land or non-agricultural households with agricultural land did not enjoy such an income increase. We also investigated whether it induced households near the bridge to participate in the agricultural sector, but the results were insignificant. In short, agricultural households in Thailand enjoyed positive gains from establishing the second bridge.     

International Reserves: Precautionary Versus Mercantilist Views,Theory and Evidence

This paper compares the importance of precautionary and mercantilist motives in the hoarding of international reserves by developing countries. Overall, empirical results support precautionary motives; in particular, a more liberal capital account regime increases international reserves. Theoretically, large precautionary demand for international reserves arises as a self-insurance to avoid costly liquidation of long-term projects when the economy is susceptible to sudden stops. The welfare gain from the optimal management of international reserves is of a first-order magnitude, reducing the welfare cost of liquidity shocks from a first-order to a second-order magnitude.

商业银行国际贸易融资汇率风险防范研究

国际贸易融资业务目前已成为许多国际性银行的主要业务之一。针对我国汇改后商业银行开展国际贸易融资业务中最主要的汇率风险,商业银行应利用金融衍生产品规避风险,并采取相应的对策措施。     

Reconsidering Consumption Risk Sharing among OECD Countries: Some Evidence Based on Panel Cointegration

In this paper we provide a characterization of international consumption risk sharing among a sample of OECD countries based on panel cointegration and error-correction techniques. Our results indicate that around 30% of idiosyncratic consumption risks are shared in the short run. In the long run, however, only about 10% of idiosyncratic consumption risks are shared internationally. In addition, we find that countries characterized by relatively high foreign asset and liability positions are less exposed to shocks. Moreover, the time it takes until idiosyncratic shocks exert their full impact on consumption crucially depends on the foreign asset and liability position.

本国与东道国的双重机制下——中国主权财富基金压力分析及其解压路径研究

中国主权财富基金——中国投资有限责任公司（CIC）作为中国唯一的主权基金,尚缺乏一套完善的投资策略与投资管理机制。本文从微观层次出发,以CIC的内部治理机制、外部投资困难和东道国机制为研究对象,详细分析了中国主权财富基金在发展过程中存在的问题和面临的压力,并结合我国情况提出了相应的具体解压路径与策略。     

The Money-prices Nexus for Malaysia: New Empirical Evidence from the Time-varying Cointegration and Causality Tests

Abstract

The main objective of this study is to empirically re-investigate the money-prices nexus for Malaysia through the Johansen multivariate cointegration and the modified Wald (MWALD) causality techniques. This study covered the monthly dataset from 1971:M1 to 2008:M11. The Johansen cointegration test suggests that the variables under investigation are co-move in the long run. Furthermore, the MWALD causality test shows a bidirectional causal relationship between money supply (M2) and aggregate prices, meaning that both the monetarist's and also the structuralists' views are vindicated in the Malaysian economy. However, the time-varying cointegration and causality tests indicate that the cointegrating and also the causal relationships are not stable over the analysis period. These results suggest that inflation in Malaysia is not purely a monetary phenomenon. Therefore, implementing a tighter monetary policy may not be an effective macro-economic instrument in managing the inflationary behaviour in the Malaysian economy.     

Taxation and educational development: Evidence from British India

This paper measures the effects of public expenditures on literacy in early 20th century British India. Using a new dataset and an instrumental variables strategy, I find that public investments in primary education had positive and statistically significant effects on literacy. A 10 percent increase in 1911 per-capita spending or 44 additional primary schools would have translated into a 2.6 percentage point increase in 1921 literacy in the population aged 15-20. The findings, however, differ by gender: the IV estimates on spending are statistically significant only for male literacy. India’s historical experience thus suggests that building more schools would not have solved the problem of female illiteracy that continues to persist even today.     

Price Common Volatility or Volume Common Volatility? Evidence from Taiwan's Exchange Rate and Stock Markets

This paper investigates the common volatility structure of stock and exchange rate markets of Taiwan. The two markets are often linked together and we are interested in knowing whether price or volume is a good proxy to pursue this issue. We claim that Taiwanese government interventions distort the timing of conventional price volatility clustering in the two markets. The unrestricted trading volumes reveal more information regarding the market than price. We find that common volatility does exist in the stock and exchange markets and this fact is uncovered more easily by using trading volume than by using prices.     

Pricing of foreign exchange risk and market segmentation: Evidence from Pakistan's equity market

This paper undertakes empirical analysis to investigate whether foreign exchange rate risk is priced, and the extent to which the Pakistani equity market is integrated into world equity markets. For the period January 1993–January 2013, we investigate unconditional pricing using the iterated generalized method of moments, employing industry and size portfolios formed from 180 firms traded on the Karachi Stock Exchange. Using the multi beta asset pricing model, we find that exchange risk is priced into the Pakistani equity market over the full sample period. Moreover, we find strong evidence that the Pakistani equity market is segmented from world markets, especially in the post 9/11 period.     

私人消费、净产出与国际金融发展——基于“金砖国家”的实证比较分析

本文基于私人消费和净产出关系测度国际资本流动水平,采用混合OLS、Swamy随机系数模型和状态向量空间三种计量方法比较分析"金砖国家"国际资本流动水平和变化过程,进而评估各国国际金融的发展水平和系统稳健性。结果表明:"金砖国家"总体国际金融发展水平较低且各国之间存在较大差异性,其中印度一直保持对资本流动的严格管制,而南非对资本管制一直相对宽松。俄罗斯的资本流动水平最高,但其变化最为剧烈,中国和巴西的资本流动水平和变化程度则处于中间位置。各国应重新审视自身存在的问题,促进国际金融健康发展。     

Inputs,networks and quality-upgrading: Evidence from China in India

This paper exploits China's accession to the WTO to investigate the impact of a supply shock on quality across the Indian production network. After controlling for increased import competition, including in downstream and third-country markets, and for new export opportunities, we find that a fall in input tariffs raises revenue, quality and prices, whilst lowering quality-adjusted prices and the probability of product exit – consistent with a simple model of multi-product manufacturers gaining access to higher-quality components. Upgrading persists for at least ten years; at the peak in 2010, products with a 10% higher pre-accession input tariff, and hence a larger post-accession fall in tariffs, have 5.3% higher quality. This in turn raises quality further down the supply chain, with input-output linkages amplifying the one-step effect by up to 75%. These results highlight a potential beneficial impact of the “China shock” in developing countries, namely supply-driven quality upgrading.