Inflationary finance in an open economy

Models of inflationary finance that consider trade and capital flows generally conclude that openness curtails the ability of governments to impose the inflation tax due to currency substitution. This paper models two channels that allow central banks to increase inflation tax revenue by opening the economy. First, central banks can open the capital account subject to a reserve requirement on capital inflows. Revenue maximization produces a smaller reserve requirement on foreign capital inflows that on domestic deposits. Second, central banks can impose prior import deposits to broaden the monetary base in order to use the inflation tax on imports as an alternative to tariff revenue.     

Comparative statics of a two-country capital/money model

This paper presents a two country version of James Tobin's capital/money model, with international trade and capital transactions. The model is used to derive comparative static properties of financial market equilibrium under four alternative regimes: fixed or flexible exchange rates combined with a pegged foreign government interest rate or a fixed supply of foreign government debt. The comparative static results derived by Tobin for a closed economy, and by William Branson for a small country with an open economy, are preserved in the model developed here only in the case where both the exchange rate and the foreign interest rate are pegged. The reasons for this are explored.     

Tax reform, the informal economy, and bank financing of capital formation

This paper develops a model that relates businesses’ entry into the underground economy to tax rates and the need to access the banking system. The model uses a dynamic approach in which both firms and banks optimize and in which the benefits to a firm of accessing the banking system are endogenous. A firm compares the return to capital with the marginal tax rate on capital income and uses the difference to determine how much of the tax to pay. At the same time, banks use a firm’s capital tax payments, combined with the capital tax rate to obtain an estimate of the firm’s minimum capital value. If the firm pays at least some taxes then it will have access to the banking system, which will allow it to finance investment. If the firm pays no taxes, then it cannot access the banks and cannot invest. We compare the equilibria resulting from tax compliance and tax evasion. We calibrate the model to a highly stylized version of the Russian economy, and analyze the effect of potential tax changes on the underground economy. We compute a dynamic equilibrium for our model, and note that it tracks the path of certain macroeconomic variables of the Russian economy (GDP, budget and trade balances, price level and interest rate) with some accuracy for the years 2001–2008. We are unable to track the underground economy, as this data is unobservable. We then carry out a series of counterfactual simulations, first asking if non-capital intensive firms have an incentive to evade taxes under existing value added tax rates. We find that they do, and that the incentive would have been greatly reduced if the value added tax rate had been selectively reduced for the non-capital intensive sectors. We then ask what the effect would be if the corporate tax rate were raised on capital intensive sectors. The simulations indicate that the capital intensive sectors would not increase their entry into the underground economy.     

Adjustment patterns to commodity terms of trade shocks: The role of exchange rate and international reserves policies

We analyze the way in which Latin American countries have adjusted to commodity terms of trade (CTOT) shocks in the 1970–2007 period. Specifically, we investigate the degree to which the active management of international reserves and exchange rates impacted the transmission of international price shocks to real exchange rates. We find that active reserve management not only lowers the short run impact of CTOT shocks significantly, but also affects the long run adjustment of REER, effectively lowering its volatility. We also show that relatively small increases in the average holdings of reserves by Latin American economies (to levels still well below other emerging regions current averages) would provide a policy tool as effective as a fixed exchange rate regime in insulating the economy from CTOT shocks. Reserve management could be an effective alternative to fiscal or currency policies for relatively trade closed countries and economies with relatively poor institutions or high government debt. Finally, we analyze the effects of active use of reserve accumulation aimed at smoothing REERs. The result support the view that “leaning against the wind” is potent, but more effective when intervening to support weak currencies rather than intervening to slow down the pace of real appreciation. The active reserve management reduces substantially REER volatility.     

Selecting a portfolio with skewness: Recent evidence from US,European, and Latin American equity markets

Polynomial goal programming, in which investor preferences for skewness can be incorporated, is utilized to determine the optimal portfolio from Latin American, US and European capital markets. The empirical findings suggest that the incorporation of skewness into an investor’s portfolio decision causes a major change in the resultant optimal portfolio. The empirical evidence indicates that investors do trade expected return of the portfolio for skewness.     

Free trade taxation and protectionist taxation

The goal of this paper is to seek new insight regarding international tax policy by recasting it in parallel with the theory of international trade. This is accomplished by defining a free trade taxation regime as one that is consistent with an efficient worldwide allocation of capital, and evaluating within this perspective various aspects of tax policy, such as value-added (axes, integration, income shifting, and the choice of worldwide or territorial system of taxes.Compatibility with free trade is not the only standard against which to judge an international tax system. Nevertheless, as national economies become more integrated the importance of international taxation for the efficient functioning of capital markets will become a central policy issue.     

金融发展、汇改最优次序与长期经济增长--基于118个经济体的面板模型的分析

本文构建由金融发展、资本开放、汇率制度与产出增长组成的理论模型,选取世界上118个经济体1972-2016年的宏观数据,综合运用动态面板、面板门槛与面板IV模型进行实证分析。本文得出主要结论为:第一,在汇率制度弹性对长期经济增长的边际影响中,金融发展水平呈显著为正的调节效应;第二,对于金融发展水平较高的国家,汇率制度弹性在资本项目开放度与长期经济增长之间存在显著正向的调节效应;第三,在金融发展水平较高时,对外贸易开放度在汇率制度弹性与长期经济增长之间存在显著为正的中介效应。借鉴历史发展经验,本文归纳出"先发展国内金融市场,再开放浮动汇率,最后加强资本开放"的汇改最优次序,为我国克服汇率制度改革难点、推进资本项目开放、维持经济基本面稳定增长提出合理化政策建议。     

人民币资本项目可兑换的前景和路径

人民币资本项目可兑换涉及国内国际多方面的问题,是一个达成共识的过程。本文综合分析了国际经验及资本项目可兑换与通货膨胀、汇率制度、国际货币体系等方面的关系,提出我国可以在多维区间内拟定目标,有计划、有步骤地推进人民币资本项目可兑换。我国自1996年宣布实现经常项目可兑换以来,已经在对外贸易、投资及其他多方面为实现资本项目可兑换打下了基础,为更有预见性地推动这一进程,还需要正视改革需要付出的代价,正确认识套戥行为,妥善解决双重价格问题,争取做到利大弊小,顺利推进。     

关于贸易和汇率间相互引导关系的实证分析及启示

针对在我国究竟是贸易引导汇率和资本流动,还是汇率引导贸易和资本流动这一争议,文章采用计量分析的方式进行了实证检验。实证结果显示,在这三个变量中,贸易差额居于至关重要的地位,其变化引导着人民币汇率变动和跨境资本流动。因此,要缓解我国资本流入的压力,保持人民币在合理水平上的基本均衡,必须从根本上加快转变经济发展方式,减少经济发展对“净出口”的依赖,实现进出口贸易的基本平衡,同时加快推进资本项目可兑换,便利企业“走出去”进行全球投资,并加快推进汇率形成机制改革。     

Convergence,capital accumulation and the nominal exchange rate

This paper develops a flexible price, two-sector growth model with a nominal side to study the role of the exchange rate in transition dynamics. We adopt a standard small open economy model with traded and nontraded goods, where the engines of growth are exogenous productivity improvements and capital accumulation. We enhance this standard framework by adding a preference for real money holdings, captured by money-in-the-utility. We follow Schmitt-Grohé and Uribe (2003) and assume that the interest rate on bonds issued by the small open economy is debt-dependent, and interpret it as a simple financial friction. We show analytically that the choice of the exchange rate regime influences the transition dynamics of a small open economy through the balance sheet of the central bank. We then calibrate the model to explore the quantitative significance of our results. We find that the choice of the exchange rate regime has significant and lasting effects on prices, consumption, investment and sectoral allocations, and the composition of financial assets.     

贸易摩擦、宏观经济波动与经济开放程度的选择

本文构建一个包含关税冲击以及外汇风险溢价的两国开放经济DSGE模型,创新地揭示了关税冲击造成实际汇率波动的“直接效应”与“间接效应”,刻画了关税变动、贸易条件与实际汇率之间的动态关系与作用机制。我们深入分析了不同经济开放程度下贸易摩擦造成的宏观经济波动以及经济福利损失。模拟结果表明,在一定贸易开放程度下,外国加收关税一方面会导致本国贸易条件恶化,引发出口及产出下降;另一方面会导致本国汇率贬值,引发出口及产出增长。关税冲击发生后短期中汇率贬值效应占优,本国产出会出现小幅上升,随后贸易条件恶化效应逐步显现,产出持续下降。福利分析结果表明,本国适度提升贸易开放度,虽然经济福利损失会小幅上升,但福利损失增加幅度小于外国,会在贸易摩擦竞争中形成相对优势;如果本国过度提高贸易开放度,则会导致本国福利损失大幅增加,并且大于外国福利损失增幅,会在贸易摩擦竞争中形成相对劣势。因此,应适度逐步有序地提升贸易开放度。此外,本国适度推进资本账户开放的政策能够改善贸易条件,促进本国经济增长。     

贸易摩擦、宏观经济波动与经济开放程度的选择

本文构建一个包含关税冲击以及外汇风险溢价的两国开放经济DSGE模型,创新地揭示了关税冲击造成实际汇率波动的“直接效应”与“间接效应”,刻画了关税变动、贸易条件与实际汇率之间的动态关系与作用机制。我们深入分析了不同经济开放程度下贸易摩擦造成的宏观经济波动以及经济福利损失。模拟结果表明,在一定贸易开放程度下,外国加收关税一方面会导致本国贸易条件恶化,引发出口及产出下降;另一方面会导致本国汇率贬值,引发出口及产出增长。关税冲击发生后短期中汇率贬值效应占优,本国产出会出现小幅上升,随后贸易条件恶化效应逐步显现,产出持续下降。福利分析结果表明,本国适度提升贸易开放度,虽然经济福利损失会小幅上升,但福利损失增加幅度小于外国,会在贸易摩擦竞争中形成相对优势;如果本国过度提高贸易开放度,则会导致本国福利损失大幅增加,并且大于外国福利损失增幅,会在贸易摩擦竞争中形成相对劣势。因此,应适度逐步有序地提升贸易开放度。此外,本国适度推进资本账户开放的政策能够改善贸易条件,促进本国经济增长。     

The determination of capital controls: Which role do exchange rate regimes play?

This paper investigates the role of exchange rate regime choices in the determination of capital controls in transition economies. We first use a simultaneous equations model to allow direct interactions between decisions on capital controls and on exchange rate regimes. We find that exchange rate regime choices strongly influence the imposition or removal of capital controls, but the feed-back effect is weak. We further estimate a single equation model for capital controls with exchange rate regime choices as independent variables, and we find that there is a hump-shaped relationship between exchange rate regime flexibility and capital control intensity.     

Assessing Economic and Fiscal Reforms in Lebanon: A Dynamic CGE Analysis with Debt Constraints

Since the early 1990s, Lebanon has undertaken a number of economic reforms, covering international trade and internal fiscal policy issues in particular. Simultaneously, debt has been skyrocketing, partially justified by reconstruction needs after the end of the civil war. Fostering economic growth seems to be the only way out of the debt trap, but reforms intended to stimulate growth may well have adverse short-run effects on public and external deficits. We construct a dynamic open-economy computable general equilibrium (CGE) model with debt constraints in the sense that external debt requires physical capital as collateral. The CGE model allows us to study the effects of a number of important economic policy issues, such as fiscal policy reform, World Trade Organization (WTO) membership, and foreign direct investment, in a multisectoral dynamic setting under the realistic assumption that debt constraints relax when the economy starts growing. Included in the results are reports on scenarios of trade liberalization and political stabilization.     

国际资本流动的原因、路径和趋势

20世纪90年代以来,国际资本流动速度进一步加快,通过促进国际贸易发展和提高国际市场效率两个方面,推动了世界经济的快速增长。文章介绍了近年来国际资本的流动规模,各类国际资本（如国际直接投资、证券投资）的流动形式及国际资本流向格局,指出国际资本流动既使世界经济失衡表现为一种动态均衡,也推动了世界产业结构的调整。     

Dynamic optimal capital structure with regime switching

We investigate the optimal capital structure of a corporate when the dynamics of the assets (both growth rate and volatility) change following different states of the economy. Two structural models are examined in the paper. The first considers the case when the firm is not facing tax benefit and bankruptcy costs with a regime switching dynamics. This model extends the Black and Cox (J Financ 31:351–367, 1976) model to allow for regime switching risk. The second model incorporates both tax benefit and bankruptcy costs with a regime switching dynamics. This is is more realistic, and is an extension of the Leland (J Financ 49(4):1213–1252, 1994) model with regime switching risk. We obtain closed-form analytic solutions for the optimal capital structure and default barrier for both models.     

试论产业结构差异对国际贸易格局的影响:日美案例

近二十年来,日本、中国都先后发生了大规模资本输出与商品输出并存的情况,而美国则长期处于资本项目顺差、经常项目逆差的状态中.本文认为,产业结构差异带来的资本回报率差异是形成这一现象的一个重要原因,即美国更为先进的产业结构导致美国可以提供更高的资本回报率,从而可以长期吸引国际资本的流入,支撑其经常项目的逆差.     

Creating a new socio-technical regime in China: Evidence from the Sino-Singapore Tianjin Eco-City

The Sino-Singapore Tianjin Eco-City (SSTEC) in China was designed to leverage Singaporean expertise in top-down city planning, systematic management, and water treatment technologies and act as a replicable hub-and-spoke model. This study shows that an expansion of the scale of urbanization, and its transformation into the focal point of the hub-and-spoke eco-city model will enable China to advance as an international pioneer, by the creation of a new socio-technical regime dependent on green and ecologically sustainable systems. In particular, the potential capacity of China's new socio-technical regime, built on eco-cities, is based on its capability to (1) create a vision for a smart energy system; (2) drive down the cost of renewable energy equipment and devices; (3) support local industrial clusters for socio-economic development; (4) implement effective policies for city-level solutions; and (5) standardize and replicate these strategies in the new regime as a whole. In the top-down landscape approach, the public authority's integrated administrative capability and capacity is important as a means by which to link the various types of stakeholders. This has to be done, in the process of managing a city's transition and reducing the risk of transformational failure, by reinforcing the four types of capital assets – namely manufacturing capital, natural capital, human capital, and social capital.     

MACROECONOMIC ADJUSTMENT TO CAPITAL INFLOWS: LESSONS FROM RECENT LATIN AMERICAN AND EAST ASIAN EXPERIENCE

Capital inflows to some developing countries have increasedsharply in recent years. Impelled by better economic prospectsin those countries, lower international interest rates, anda slowdown of economic activity in the capital-exporting countries,the inflows have furnished financing much needed to increasethe use of existing capacity and to stimulate investment. Butcapital inflows can bring with them their own problems. Typicalmacroeconomic repercussions have been appreciation of the realexchange rate, expansion of nontradables at the expense of tradables,larger trade deficits, and, in regimes with a fixed exchangerate, higher inflation and an accumulation of foreign reserves. Should government intervene to limit some of these side effects—andif so, how? The question is especially pressing in the wakeof the Mexican crisis of December 1994. This article looks foranswers in the experience of four Latin American and five EastAsian countries between 1986 and 1993, examining the effectsof the capital inflows on the economy and comparing the differentways in which these countries responded to the problem of "toomuch" capital.      

The transmission of market shocks and bilateral linkages: Evidence from emerging economies

The linkage between emerging and developed economies spans beyond the usual trade in goods and services. Underlying trade is the flow of capital for foreign direct investment and for speculation in markets, which renders emerging economies vulnerable to shocks from the developed world. As such, equity return volatility in emerging markets is partly attributable to this dependence. To gauge the importance of bilateral economic and cultural factors in driving economic integration, we adopt a two-step process. First, we use Diebold and Yilmaz's spillover index methodology to extract spillover indices representative of the return volatility spillover effects of the United States, the developed portion of the Euro area, and Japan on financial markets in Asia, the Gulf Cooperation Council countries, Eastern and Central Europe, Africa, and Latin America. Second, we test whether these indices are governed by economic and cultural factors. Our results show that the spillover effects vary across markets and that a strong correlation exists with the volume of trade, security investment, common language, distance, and market capitalization.