Elections and the timing of devaluations

This paper presents a rational political budget cycle model where devaluation acts as a tax on consumption due to a cash-in-advance constraint. Competent governments can signal their competency by reducing the rate of devaluation prior to elections. When voters also ignore the degree to which governments are opportunistic, i.e. the extent to which they are willing to distort the economy for electoral gain, an incompetent, opportunistic incumbent can reduce the rate of devaluation in the run-up to an election. The main theoretical implication in either setup, that the rate of devaluation is significantly higher in the months following an election, is consistent with evidence drawn from 26 countries in Latin America.     

Real exchange rate targeting and macroeconomic instability

Using an optimizing model of a small open economy, this paper studies the macroeconomic effects of PPP rules whereby the government increases the devaluation rate when the real exchange rate—defined as the price of tradables in terms of nontradables—is below its long-run level and reduces the devaluation rate when the real exchange rate is above its long-run level. The paper shows that the mere existence of such a rule can generate aggregate instability due to self-fulfilling expectations. The result is shown to obtain in both flexible- and sluggish-price environments.     

资产减值会计处理与会计信息质量要求

会计信息的谨慎性作为会计的一个重要惯例,要求报告提供者向使用者尽可能提供可发生的风险损失信息,而资产减值的确认直接关系到企业资产成本的真实性,对投资者的决策具有重要影响作用。国务院《企业会计准则第8号—资产减值》,对资产减值确认、资产减值计量、资产减值的报告与会计信息质量制定,都作出了详细规定,有力地促进了我国资产减值的会计处理向全面、科学的方向发展。     

资产减值会计处理与会计信息质量要求

会计信息的谨慎性作为会计的一个重要惯例,要求报告提供者向使用者尽可能提供可发生的风险损失信息,而资产减值的确认直接关系到企业资产成本的真实性,对投资者的决策具有重要影响作用。国务院《企业会计准则第8号一资产减值》,对资产减值确认、资产减值计量、资产减值的报告与会计信息质量制定,都作出了详细规定,有力地促进了我国资产减值的会计处理向全面、科学的方向发展。     

Bilateral trade effects of fiscal devaluation: Evidence from OECD countries

This paper empirically examines the effects of a fiscal devaluation on bilateral trade. To this end, employers’ social contribution (ESC) and value-added tax (VAT), which stand as the factors that represent typical fiscal devaluation, are embodied within the framework of a gravity model. Fixed effects vector decomposition (FEVD) technique is applied to the empirical models specified within this framework, employing panel data from 22 OECD countries over the 1980–2014 periods. The findings show that the effectiveness of the fiscal devaluation policy seems to alter with respect to how ESC and VAT are measured. Considering the fiscal devaluation policy implemented unilaterally, the policy turns out to be effective in nine countries in the sample.     

Devaluations and emerging stock market returns

Stock returns over the 2 years surrounding 24 currency devaluations are examined. Using bootstrapped distributions, returns preceding the devaluation are shown to be significantly below normal, in both dollar and local currency terms. Most of the downturn, however, occurs well before the month of the devaluation. Returns following a devaluation are normal. While industry and company specific effects appear to influence return behavior, only country effects and leverage levels are statistically significant. At the country level, both aggregate economic activity (GDP) and the size of the devaluation are important in explaining return behavior. The stock of foreign debt has little impact on returns. Finally, even though returns appear to anticipate devaluations, they are not statistically significant at predicting the size of the devaluation.     

SRI LANKA'S EXPERIMENT WITH DEVALUATION: VAR and ECM Analysis of the Exchange Rate Effects on Trade Balance and GDP

The objective of this study is to empirically analyze the impact of the devaluation of the Sri Lankan currency (rupee) on Sri Lankan trade balance and gross domestic product. The World Bank and the International Monetary Fund (IMF) have been promoting devaluation as a policy tool for economic growth and stability in LDCs. However, there is substantial research supporting the “J-Curve” effect and contractionary effects on economies due to devaluation, especially for less developed countries (LDCs). The results show a contractionary impact on the Sri Lankan output.     

Devaluation without common knowledge

In an economy with a fixed exchange rate regime that suffers a random adverse shock, we study the strategies of imperfectly and sequentially informed speculators that may trigger an endogenous devaluation before it occurs exogenously. The game played by the speculators has a unique symmetric Nash equilibrium which is a strongly rational expectation equilibrium in the set of all strategies with delay. Uncertainty about the extent to which the Central Bank is ready to defend the peg extends the ex ante mean delay between the exogenous shock and the devaluation. We determine endogenously the rate of devaluation.     

美元贬值对中国进出口企业的影响及对策

美元下跌之势难抑,国际外汇市场风险加剧。美元的贬值影响到以美元计价商品进口成本的提高,从而压缩了企业利润水平,容易诱发新一轮的贸易保护和贸易摩擦。人民币采取盯住美元有管理的固定汇率制度,美元贬值使人民币被动贬值。在长期实行的结售汇制定下,企业调整外汇净头寸的能力非常差,汇率波动对净头寸造成的损失是巨大的。中国应加强对未来汇率变动趋势的预测和把握,从根源上铲除被诉反倾销的隐患。     

Adjustment to devaluation with money and nontraded goods

This paper analyzes the dynamics of adjustment to devaluation in a framework which highlights the role played by nontraded goods and money. We provide a specific analytical model of devaluation incorporating substitution effects in production and consumption as well as liquidity effects resulting from a stock-flow adjustment process. The analysis provides specific solutions for the time path of the balance of payments and the price of nontraded goods following devaluation.     

Devaluation and liberalization in the presence of tariff and quota restrictions: An equilibrium model

The purpose of this paper is to examine and compare the effects of devaluation and trade liberalization policies on a monetary economy which uses quotas in contrast to an economy which uses tariffs. This is done in a general equilibrium framework. The paper also investigates the reasons for coupling liberalization policies with a devaluation.     

Dynamics of currency crises with asset market frictions

This paper presents a dynamic model of currency crises with frictions. By construction, a speculative attack is not an instantaneous event but takes a little time to deplete the country's reserves and, in the event of an attack, agents are uncertain about whether they will be able to act before the devaluation comes. The currency will be overvalued (‘ripe for attack’) for a long time before an attack takes place. A discrete and sizable devaluation will occur. Small changes in fundamentals may trigger an attack. The model brings insights about the dynamics of currency crises and the effects of some key policy variables.     

Retailing to Foreign National Consumers in the Border Zone

Abstract

This study investigates the factors that affect how retailers in a border zone manage the elements of the retail mix with respect to foreign national consumers. Several hypotheses concerning the effects of competition from foreign retailers and currency devaluation(s) on variables of the retail mix and traditional measures of perceived retailer outcomes are advanced. Results indicate that while perceptions of devaluation have an impact on the planning of the retail mix as well as on perceived retail outcome measures, competition from foreign retailers is not perceived to be an important factor. Research and managerial implications are offered.     

Globalization and the ‘confidence game’

We show that governments in developing countries have an incentive to play the “confidence game” — wherein the need to win the confidence of the international capital market ‘can actually prevent a country from following otherwise sensible policies and force it to follow policies that it would normally consider perverse’. This incentive arises because of a combination of a ‘conformity bias’ and ‘good news bias’ in governmental decision making in an open economy, which results in inefficient outcomes which increases rather than decreases the threat of devaluation. While institutions that encourage greater transparency and the public revelation of information, may often mitigate this inefficiency, on some occasions increased transparency may even exacerbate the inefficiency.     

Contractionary effects of devaluation

A simple model is developed to illustrate a number of contractionary effects of currency devaluation, some of which have been noted previously. In a Keynesian model, it is shown that depreciation can lead to a reduction in national output if (i) imports initially exceed exports: (ii) there are differences in consumption propensities from profits and wages; (iii) government revenues are increased by devaluation, e.g. when there are significant export taxes. Similar effects are also shown to exist in monetarist models, via reductions in both real balances and the nominal money supply. A numerical example illustrates the results for an economy ‘typical’ of semi-industrialized countries.     

Devaluation - Defeat or Golden Opportunity?

This paper considers whether the recent sterling devaluation represents a defeat for government policy or a golden opportunity for industrial recovery. It argues that devaluation offers a window of opportunity for higher growth and investment, but that this will disappear after two or three years with higher inflation. The risk is that this may distract firms from the necessity of competing on product and process innovation and marketing. The damage to the credibility of government policy has also been profound.     

Devaluation,Innovation, and Prices

We investigate the effects of exchange rate changes on innovation by a multinational corporation. The firm enjoys a monopoly in the home market but engages in Cournot competition with a domestic firm in the foreign market. Changes in currency values affect the multinational firm’s profits in domestic currency units, and thus influence the optimal level of process innovation as well as output and prices in the two markets. We find that a devaluation of the home currency will lead the home firm to increase its output in both the home and foreign markets, and increase its spending on R&D. We also find that currency devaluation in the home market leads to lower prices in both markets.     

Solvenz- und Liquiditätsrisiken in der Türkei

The crisis in Turkey is largely self-inflicted and is only superficially related to the tightened US trade sanctions. Numerous expansionary economic policies have led to economic overheating and a sharp increase in the private debt of banks and non-financial companies. Significant solvency and liquidity risks have arisen with the recent sharp devaluation of the Turkish lira because of the high level of foreign debt, which is nearly completely denominated in foreign currency. If the exchange rate remains at the current level, corporate bankruptcies are likely, particularly in case of highly indebted non-financial companies which are hardly hedged against devaluation risks.     

Financial dollarization and debt deflation under a currency board

In the late currency board years, Argentina faced a real exchange rate adjustment through price deflation amidst growing devaluation expectations. Using a firm-level panel database to analyze the incidence of these factors on the currency composition of private debt and on firms’ performance, we find that widespread debt dollarization showed no relationship with the firms’ production mix or the ever-changing probability of a nominal devaluation. While relative price changes favored export-oriented firms with the expected impact on sales, earnings and investment, increases in devaluation expectations elicited only a marginal differential response in investment from more financially dollarized firms. Our findings provide support to two criticisms faced by the Argentine currency board in recent years, namely, that by fueling beliefs in an implicit guarantee it stimulated across-the-board debt dollarization and that it could not fully isolate the economy from real shocks, as the feared balance sheet effect was replaced by a gradual but equally deleterious debt deflation effect.     

Is the international propagation of financial shocks non-linear?: Evidence from the ERM

This paper tests for the presence of non-linearities in the propagation of devaluation expectations among the countries that were members of the Exchange Rate Mechanism of the EMS. We show that whenever it is possible to estimate a model for financial interdependence, a full-information technique to detect such non-linearities is more efficient than the limited-information estimator proposed, in a similar context, by Rigobon (2000). This happens, in particular, when the periods of market turbulence are relatively short. Our evidence suggests that non-linearities in the propagation of devaluation expectations were a general phenomenon in the ERM. Normally the non-linearity amounts to a stronger effect in the same direction, but sometimes, as in the Dutch case, it implies a significant effect in the opposite direction: evidence of flight-to-quality.