The role of China in global external imbalances: Some further evidence

The large imbalances in the current account positions of the US and the Asian economies are seen by most scholars as the main threat to an orderly development of the global economy. While the opinions on the most likely evolution of these imbalances and on their sustainability do differ across observers, ranging from catastrophic to rather optimistic views, almost all agree that some adjustment will have to take place in the near future, and that this adjustment will involve, among other things, a rebalancing of saving and demand across the globe. As an outcome of this process, China shall increasingly supplement the US in the role of engine of global economic growth.Using a global macroeconometric model, we examine the impact on this adjustment process of a number of shocks originating in the Chinese economy, including an expansionary fiscal shock, a revaluation of the renmimbi, and an expansion of internal demand following an acceleration in the process of rural–urban migration. The analysis focuses on two related points: how will these shocks affect the medium-run evolution of transpacific imbalances, and what will their impact be on global economic growth. The simulations allow us to track the impact of these shocks on the different poles of the world economy, and to assess their relative contribution to the task of reducing global imbalances without interrupting global economic growth.     

Three current account balances: A “Semi-Structuralist” interpretation

Three current account imbalances – one very large deficit (the United States) and two surpluses (Japan and the Euro area) – are subjected to a minimalist structural interpretation. Though simple, this interpretation enables us to assess how much of each of the imbalances require a real exchange rate adjustment. According to the estimates, a large part of the U.S. current account deficit (nearly 2 percentage points of the 2006 deficit of 5(1/2)% of GDP) will undergo an adjustment process that involves real depreciation in its exchange rate. For Japan, a little more than 1 percentage point (of GDP) of the current account surplus is found to require an exchange rate movement (real appreciation) as the surpluses adjust down. For the Euro area, less than half a percentage point of its current account surplus is found to require an adjustment via real appreciation.     

Global Imbalance Adjustment: Stylized Facts,Driving Factors and China's Prospects

This paper summarizes global imbalance adjustment after the GFC and analyzes the evolution of balance of payments using a four‐quadrant diagram. We construct the framework of a stock adjustment mechanism to analyze the main driving factors for the imbalance in surplus/deficit countries and debtors/creditors in an attempt to determine the sustainability of imbalance adjustment. We find that imbalances have been reduced to some extent, but most countries have not achieved rebalance after the global financial crisis. Therefore, we propose an ideal path for global imbalance adjustment and summarize the policy practices of representative countries that have followed this route. Based on our analysis, we suggest that China should learn from the Australian experience and adopt a macro‐prudential assessment policy, actively adjust the domestic economic structure and optimize the structure of balance of payments.     

REER Imbalances and Macroeconomic Adjustments in the Proposed West African Monetary Union

With the spectre of the euro crisis hunting embryonic monetary unions, we use a dynamic model of a small open economy to analyse real effective exchange rate (REER) imbalances and examine whether the movements in the aggregate real exchange rates are consistent with the underlying macroeconomic fundamentals in the proposed West African Monetary Union (WAMU). Using both country‐oriented and WAMU panel‐based specifications, we show that the long‐run behaviour of the REERs can be explained by fluctuations in the terms of trade, productivity, investment, debt and openness. While there is still significant evidence of cross‐country differences in the relationship between underlying macroeconomic fundamentals and corresponding REERs, the embryonic WAMU has a stable error correction mechanism, with four of the five cointegration relations having signs that are consistent with the predictions from economic theory. Policy implications are discussed, and the conclusions of the analysis are a valuable contribution to the scholarly and policy debate over whether the creation of a sustainable monetary union should precede convergence in macroeconomic fundamentals that determine REER adjustments.     

浮动汇率制度有助于经常账户的调节吗?——基于双倍差分法的实证检验

本文运用双倍差分法,分别选择20世纪90年代亚洲金融危机和20世纪70年代布雷顿森林体系的解体两个事件作为"自然实验",实证研究汇率制度与经常账户调节的关系。研究表明,相对于固定汇率制度,浮动汇率制度未能显著地促进经常账户的调节。通过让经常账户盈余国由固定汇率制度调整为浮动汇率制度的做法不会改善全球性经常账户失衡问题。     

宏观经济失衡的动因及其调整方略

近年来,我国经济出现内外失衡格局:内部失衡最突出的表现是储蓄、投资和消费关系的失衡(高储蓄、高投资和低消费),外部失衡则以双顺差为特征。我国经济内外失衡源于其出口导向的经济增长战略。我国的宏观经济政策必须作出新的选择。单一政策不能解决我国经济内外失衡问题,而应该更多地倚重财政政策。鉴于财政扩张与货币升值是一种有效的宏观经济政策组合,根据我国区域二元经济结构状况,应建立全国统一性和区域差异性相结合的央行货币政策调控体系。     

Macroeconomic adjustment programmes in the euro area: an overall assessment

Since the start of EMU (Economic and Monetary Union), the euro area, and more broadly the global economy, experienced an unprecedented credit boom. The expansion of credit was particularly strong in Greece, Ireland, Portugal and Cyprus and all of them subsequently needed official financial support. In each of the four programmes, financial assistance has been provided and promised against the commitment of each country to fulfil certain economic policy conditions contained in the macroeconomic adjustment programme. In general, a macroeconomic adjustment is a process driven by policies but also by changes in private spending behaviour (consumption, imports, investment) and improvement in competitiveness that countries are required to undertake after a large shock. In the case of the four countries, the shock emerged as a consequence of an excessive accumulation of imbalances in different parts of the economy: in the public sector in Greece, in the housing and banking sectors in Ireland, external imbalances in Portugal and in the banking sector in Cyprus. The paper looks at the feasibility of the fiscal adjustment comparing the macroeconomic conditions in the four countries and emphasising the role of the fiscal multipliers in the process. It also assesses the fall in the output in a comparative framework, stressing the role played by the different components of demand either in amplifying the effect of the fiscal consolidation or in offsetting it. In addition, it considers formulation of the programmes as well as their implementation with most attention devoted to reforms aiming at improving competitiveness, growth and employment in the framework of a cross-country approach.     

Do flexible exchange rates facilitate external adjustment? A dynamic approach with time-varying and asymmetric volatility

This paper revisits the claim that flexible exchange rates facilitate external adjustment. While previous studies have used exchange rate regime as a proxy for exchange rate flexibility, in this study there is evidence of ARCH effects in exchange rate, and thus GARCH models are employed to estimate volatility. A dynamic panel data model is then specified, and the Arellano-Bond estimator and the Blundell-Bond estimator are employed to estimate the effect of exchange rate flexibility on the speed of adjustment of current account in a panel of 28 emerging and developing economies. There is robust evidence that flexible exchange rates indeed facilitate smoother adjustment of current account imbalances.     

Credibility of European economic convergence

Credibility of European Economic Convergence. — The authors analyze economic convergence and its relation to European real interest rate differentials using a clustering method on seven macroeconomic key variables for 1979–1995. The results indicate that monetary convergence has progressed considerably but that there is hardly any real convergence in the EU. They also perform pooled nominal and real interest rate regressions with the individual cluster indicators as explanatory variables. The authors find significant positive effects of external (current account) and internal (unemployment ratios, government finance) imbalances on real interest rates. They also group countries according to economic reputation and find that real indicators remain significant for the high-reputation countries.     

服务贸易、非对称开放与全球失衡:一项跨国的经验研究

文章从贸易内部结构出发，分析非对称开放条件下，服务贸易兴起与全球失衡之间的关系。并利用全球59个主要贸易国家2000-2014年双边贸易数据对两者之间的关系进行计量分析，实证结果显示：第一，服务贸易净值与经常账户余额之间存在显著的负向关系，服务贸易净值提高100万美元，经常账户余额减少98.7万美元。在引入交互项之后这种关系依然显著成立。因此，服务贸易的非对称开放是造成全球失衡的重要原因。第二，技术进步和利率上调可以扭转服务贸易对经常账户的抑制作用。第三，金融危机之后，服务贸易和经常账户的负向关系进一步强化。后危机时代，全球失衡现象有可能继续恶化。第四，分位数回归发现，在低点位处服务贸易净值对经常账户的影响更为强烈。文章的研究为理解中国的服务贸易逆差提供了新的视角，并为扭转服务贸易逆差奠定了理论基础。     

Rules for Correcting External Imbalances

Three aspects to adjustment are sufficiently distinct to be treated separately. The first is the balance of payments concept that is to be adjusted. The candidates are the overall balance of payments, the “basic balance”, and the current account balance. The latter is the preferred concept; specifically, all countries should aim to keep their current balances within a range of +/− 3% of GDP. The second are the instruments to be used to adjust a payments imbalance. The basic analyses are due to Hume and Meade, for the cases in which the country respectively does not and does use variations in the exchange rate as an instrument to facilitate the adjustment process. The third relates to the question of whether the international community should build some mechanism, besides the threat of reserve depletion, that will encourage its members to pursue adjustment. Most deficit countries already have an incentive to adjust. In contrast, the incentives for surplus countries to adjust are weak and need strengthening, perhaps by permitting trade retaliation for an undervalued exchange rate through the WTO or perhaps by taxation. The United States are the most difficult case because the construction of a suitable incentive for this country would probably be dependent on reform of the reserve supply mechanism.     

Adjustment of Global Imbalances and Its Impact on China＇s Economy

I. Introduction Global imbalances have aroused increasingly greater attention worldwide. The global current account deficits are mainly concentrated in the USA and the US current account deficit is rapidly expanding, whereas the counterpart surpluses are more and more concentrated in the East Asian economies,1 especially China and other East Asian economies other than China and Japan (including the four newly industrialized economies, Indonesia, Malaysia,72 Jianhuai Shi / 71 – 85, Vol.…     

The process of financial reforms in China

This study aims to show that financial reforms in China can be viewed as an endogenous adjustment process responding primarily to economic growth and changes in political constraints. The author's argument is thus against the mainstream view in which financial reforms are regarded as primary policy tools for the promotion of economic growth. Three factors are carefully examined for the explanation of the endogenous characteristics of financial reforms. First, this paper takes a close look at endogenous aspects of Chinese financial repression. The endogenous characters of financial repression explain why financial reforms in China follow an endogenous path. Second, recent developments of legal frameworks are found to have been institutional responses to macroeconomic imbalances, financial disorders, and increased demands for property right protection. Finally, this paper shows that the lack of market infrastructure and various political constraints have been major obstacles for China's capital market development.     

Intra-industry trade as an indicator of labor market adjustment

Intra-Industry Trade as an Indicator of Labor Market Adjustment. — A growing body of recent empirical research uses measures of change in intra-industry trade as indicators of labor market adjustment. In this paper, we argue that the theoretical foundations for this work are problematic. To make this argument we develop a simple model with both inter- and intra-industry trade and adjustment. We find that changes in domestic absorption, which influence trade flows but which are distinct from production changes, make changes in IIT an unreliable guide to labor market pressure.     

南亚安全架构:结构性失衡与断裂性融合

安全架构是在明确的地域内形成的一套连贯的、统领的结构,它应有助于解答该地区的政策考虑,并帮助达成安全目标。从一个统领且连贯的角度看,南亚是一个具有独特性和相对封闭性的战略单元,其安全架构呈现出失衡性和断裂性特征。在力量上,"印度中心"特征非常明显,虽然各国对印度的依赖程度不尽相同;在制度上,南亚区域合作联盟制度设计的缺陷产生了经济、社会双重影响,导致印度和巴基斯坦两大阵营经济融合出现断裂以及社会层面上官方与非官方融合的严重脱节;在观念上,南亚地区长期存在重陆地轻海洋、重军事对抗轻人类发展的思维偏见,虽然目前陆权和海权的优先性和权重性正在被重新排序。这种失衡和断裂的安全架构无法适应新的安全诉求,也无助于南亚地区实现长久和平与持久发展。应对这种失衡和断裂进行某些纠正,使之达到相对均衡。这种纠正机制的决定力量将更多依赖于南亚的核心力量,从长远上将依赖南亚地区本身,虽然在中短期,外界的积极政策可以在客观上起到某些纠正效果。     

TRADE AND INDUSTRIAL ORGANISATION: JAPANESE AMMONIUM SULPHATE INDUSTRY IN THE INTERWAR PERIOD

Trade is considered an effective antidote to the exercise of domestic market power. This article, through an analysis of the structure, conduct and performance of the Japanese ammonium sulphate industry during the interwar period, shows that trade is not always a sufficient condition for domestic markets to become competitive. In industries exhibiting substantial economies of scale, availability and diffusion of technology, existence of surplus international capacity and the ability of domestic producers to deter imports can impede instantaneous adjustment of international supply to imbalances in demand and supply thereby allowing domestic producers to exercise their market power.     

Deviations from long-run equilibria and probabilities of devaluations: An empirical analysis of Danish realignments

Deviations from Long-Run Equilibria and Probabilities of Devaluations — An Empirical Analysis of Danish Realignments. — The probabilities of realignments between the Danish krone and the D-mark are investigated for the 1979–1995 period. Two multivariate systems are estimated. In the I (1) systems, the deviations from the cointegration relations are used as explanatory variables when determining the probabilities of exchange rate changes. It is found that real imbalances in the economy have to a large extent determined the probabilities of central parity changes. Furthermore, the probabilities of central parity changes have been significantly lower after 1983.     

金融发展对国际收支的影响:基于政府治理的视角

近年来的全球失衡突出表现在美国持续收支逆差和新兴市场国家以及石油输出国持续顺差之间的矛盾,但是传统理论无法完全解释这一失衡现象。基于金融全球化加深的事实,我们重点考察金融发展是否加剧了国际收支失衡。我们将金融发展对国际收支失衡的影响按照传导机制的思路进行解释,并利用1994～2004年81个国家的数据进行了全球范围的实证研究,我们发现,这种传导机制的作用是非常显著的,并且这种显著性受制于各国的政府治理发展状况,所以传导作用因国而异,在发达国家、东亚新兴市场以及其他发展中国家的影响不同。因此,单个国家(如中国)并不是导致当前失衡的主要原因,失衡的中国责任论是不成立的。     

Capital mobility and EU enlargement

Capital Mobility and EU Enlargement. — The membership of the Eastern European transition economies in the EU would require inter alia the full liberalization of their capital flows. Using the correlation between domestic saving and investment, this paper provides empirical evidence of the openness with respect to foreign capital that the accession states have attained so far. A comparison with the southern members of the EU shows that the countries under review have reached a similar degree of integration in quantitative terms. Yet, further adjustment in qualitative terms, i.e., in the structure of capital flows, can be expected as the process of accession proceeds.     

External adjustments and coordinated exchange rate policy in Asia

In this paper, we estimate structural VAR models with contemporaneous restrictions based on neo-classical and Keynesian theories to investigate whether the cause of current account surpluses for East Asian economies is a “saving glut” or undervalued currencies. Analytical results show that the major determinant of the current account is the real effective exchange rate for all East Asian countries with the exception of China for which the major determinant is domestic GDP. Accordingly, the recently requested revaluation of the Chinese yuan may not be an effective policy for reducing the Chinese current account surplus, and may affect other Asian current accounts. We also investigate whether a Chinese currency revaluation would contribute to the improvement of current account imbalances in East Asia and find that a revaluation would, indeed, improve the current accounts of Japan, Korea, Indonesia, and Thailand. Since the trade structures of major East Asian countries are substitutes with that of China, a Chinese currency revaluation might not lead to a decrease in East Asian current account surpluses. Coordination of currency policy among East Asian countries is, therefore, needed to solve the global current account imbalance.