Seigniorage,Dollarization and Public Debt: The Lebanese Civil War and Recovery Experience, 1982–97

The paper develops theoretical frameworks to explain the phenomena of seigniorage, dollarization, and public debt; and then applies them to the Lebanese macroeconomic situation over 1982–97. More specifically, it analyzes the implications of seigniorage and dollarization to see what extent they were responsible for the inflation and exchange rate depreciations during the civil war period. It also studies the sustainability of postwar debt. The conclusions that emerge from the analysis are that budget deficits were only one of the reasons behind the war inflation and depreciations, dollarization could still impose some problems for macroeconomic stability, and tax reforms are essential for fiscal balance.     

An Estimated Stochastic General Equilibrium Model with Partial Dollarization: A Bayesian Approach

In this paper, we develop and estimate a dynamic stochastic, general-equilibrium New Keynesian model with partial dollarization. Bayesian techniques and Peruvian data are used to evaluate two forms of dollarization: currency substitution (CS) and price dollarization (PD). The empirical results are as follow: first, it is noted that the two forms of partial dollarization are important in explaining the significance of the Peruvian data. Second, models with both forms of dollarization dominate models without dollarization. Third, a counterfactual exercise shows that by eliminating both forms of partial dollarization, the response of both output and consumption to a monetary policy shock doubles, making the interest rate channel of monetary policy more effective. Fourth, based on the variance decomposition of the preferred model (with CS and PD), it is found that demand type shocks explain almost all the fluctuation in CPI inflation, the monetary shock being the most important (39%). Remarkably, foreign disturbances account for 34% of the output fluctuations.     

Why do exports react less to real exchange rate depreciations than to appreciations? Evidence from Pakistan

We examine if and why export responses to real exchange depreciations are lower than those to appreciations. We document this asymmetric response using macro-level data for Pakistan and show that export adjustments after depreciations are less than one-third as fast as those to appreciations. We use product-destination level data to examine three complementary drivers of this asymmetry: (i) information frictions that increase the search costs of finding new clients; (ii) supply constraints related limited access to credit that reduce exporters’ capacity to scale up after relative prices become more favorable; and (iii) reduced prices in US dollars offered by international buyers after local currency depreciations, akin to a pricing-to-market mechanism. We find evidence of the three drivers explaining the dampened export response to depreciations. Policymakers in developing countries should consider addressing these issues to maximize export responses to real depreciations.     

Real dollarization in Phnom Penh,Evidence from two surveys

This paper aims to identify real dollarization in markets in Phnom Penh and to investigate how U.S. dollar (USD) and Cambodian riel or Khmer riel (KHR) perform the three functions of money—a unit of account, a store of value and a medium of exchange in markets in Phnom Penh through two simple surveys. Real dollarization refers to the use of the U.S. dollar for purchasing goods and services and for paying salary. We find that the choice of currency for transactions varies with market types, sources of products whether they are imported or domestically produced, and prices of products. The survey about currency for salary payment shows that the majority of employed persons in the private sector and in non-government organization receive salary in U.S. dollar while those who work in public sector receive salary in Khmer riel. The majority of employed persons save their money in U.S. dollar. In general, U.S. dollar dominates Khmer riel in performing the three functions of money in Phnom Penh.     

DO FOREIGN CURRENCY DEPOSITS PROMOTE OR DETER FINANCIAL INTERMEDIARY DEVELOPMENT IN LOW‐INCOME COUNTRIES? AN EMPIRICAL ANALYSIS OF CROSS‐COUNTRY DATA

Foreign currency deposits (FCD) are prevalent in many low‐income developing countries, but their impact on bank lending has rarely been examined. An examination of cross‐country data indicates that a higher proportion of FCD in total deposits is associated with more private credit only in inflationary circumstances. FCD can lead to a decline in private credit below a certain threshold level of inflation. Given that FCD exhibit persistence, deregulating them in low‐income countries could cause more harm than good to financial intermediary development in the long term.     

Future policy directions for doi moi in Vietnam

During the 1980s Vietnam experienced a radical process of industrial and service sector liberalization, known as doi moi. The process was initiated by the government as a means for managing the collapse in overseas financial support occasioned by the demise of its principal supporter, the former Soviet Union. In this paper we focus on the currency and state owned enterprise (SOE) aspects of doi moi. The paper has several aims. First, we examine the effectiveness of the currency policy introduced under doi moi through which the Vietnamese government has attempted to stabilize the VNDong with the overall aim of reversing the dollarization process and restoring confidence in the domestic currency. Second, we discuss possible capital markets instruments which may now be suitable for government financing, such as the suitability of commodity indexed bonds, a debt conversion program and establishment of a private development trust fund. Third, we consider the macroeconomic implications of Vietnam's accession to ASEAN. Lastly, we make a number of recommendations for future macroeconomic policy in Vietnam.     

International Financial Adjustment for China： A Financial Valuation Approach

International financial adjustment is the process whereby valuation shifts from asset price and currency changes result in relatively durable net wealth transfers across countries' international balance sheets. This paper applies a financial valuation approach to estimate the direction and the broad extent of recent international financial adjustments on China's international balance sheet. We estimate China's international balance sheet losses resulting from the valuation shifts over the period 2005–2010 and reveal that international currency shifts over the past decade have also generated a range of non‐balance sheet financial and monetary adjustment pressures for China. This paper also evaluates how China's evolving international financial policy arrangements could better mitigate China's exposure to international financial adjustments. These arrangements include a more effective currency mechanism and the mechanisms to internationalize the RMB to buffer international financial valuation shocks.     

US pressure on China: Silver flows, deflation, and the 1934 Shanghai credit crunch

US pressure for Chinese currency appreciation in the face of a weakening dollar was initially resisted in the post-2003 period. No such option was available in the 1930s, however, when dollar weakness was accompanied by silver purchases that automatically drove up the value of China's old silver-based currency. New empirical evidence suggests a significant link between the policy-induced driving up of US silver prices and Chinese exchange rate appreciation and price deflation. Moreover, the reversal of the silver flow into Shanghai as large-scale US purchases began in 1934 appears to have been met by a credit crunch in that city—as evidenced by bank failures, and real estate and stock market declines. The silver flow from the interior to Shanghai had previously insulated the financial center from the credit shortages faced elsewhere in China after deflation first emerged in 1932–1933.     

The Korean stock market volatility during the currency crisis and the credit crisis

This paper studies the volatility of the Korean stock market during the Asian currency crisis of 1997–1998 and the global credit crisis of 2008–2009. We use a fad model with Markov switching heteroskedasticity, which was first proposed by Kim and Kim (1996). Using the monthly data from January 1980 to October 2009, we find that the volatility of the transitory component of the stock return, or fads, increased during the currency crisis, but did not rise much during the credit crisis. It implies that the stock price fluctuations were not driven by irrational sentiments during the recent global crisis as much as during the former crisis. However, when we consider the dollar value of the Korean stock index in order to estimate the volatility that foreign investors confront, we find that the volatility of the transitory component was raised during the credit crisis as well as during the currency crisis. That is, foreign investors experienced greater volatility than domestic investors in the recent financial market turmoil. This asymmetric volatility that domestic and foreign investors face is one of the characteristics of the credit crisis.For more detailed analysis, the same model was applied to the weekly data from January 2005 to October 2009 and provided the result that the data measured by won–dollar exchange rates were more increased than the raw data. It holds that foreign investors confronted much greater volatility than domestic investors while the stock volatility was relatively lower in the credit crisis state than in the currency crisis state.     

Balance sheet effects and the country risk premium: An empirical investigation

Based on recent theories emphasizing financial imperfections, this paper is an empirical investigation of the link between a country's risk premium and the balance sheet effect of a devaluation. In a panel of emerging economies, balance sheet effects, due to increased external debt service after an unexpected real depreciation, significantly raise the risk premium. This result is robust to various checks and appears driven by those countries with the largest financial imperfections. Also, particularly large real depreciations turn out to be disproportionately important, meaning that balance sheet effects may be strongest at times of economic crisis. JEL no. F34, F41     

Price adjustment after hyperinflation in Zimbabwe

This paper examines—post‐dollarization in Zimbabwe—the extent of price dispersion within Zimbabwe and between Zimbabwe and South Africa. We document the adjustment process, and the mechanisms of price adjustment after the introduction of the new currency system in Zimbabwe. We show that prices converged post‐dollarization. We argue that the fall in price dispersion is not a product or a Southern Africa region effect. Rather it is a Zimbabwe specific effect and given that price convergence happens quicker the closer the month is to the dollarization, we argue that the observed results are driven by the change in currency. Price dispersion happens faster between major cities and secondary cities, suggesting improvements in information and trade signals between major and secondary cities. These results suggest that the positive effects of a stable currency fall disproportionally on secondary cities, implying price stability not only has macroeconomic benefits, but also developmental benefits since secondary cities and rural areas are on average, poorer than main cities.     

信贷决策、信贷官激励与金融资源配置效率

在银行主导型金融体系下,金融资源的配置效率主要取决于银行的信贷经营行为,银行对可选择的贷款机会做出的信贷决策的质量是决定资源配置效率的关键。信贷官作为银行机构的决策代理人,在不同的激励—约束条件下具有不同的收益—风险结构,以及由此产生的信息空间和决策偏好。信贷官决策过程中的信息质量以及信息披露的行为,存在不同的策略空间,每一种行为策略选择都对应着不同信贷决策所导致的金融资源配置效率。在金融结构性因素既定的条件下,银行的治理结构因素,成为决定信贷效率的原因。在我国银行主导金融资源配置的结构下,金融资源配置效     

货币互换协议、金融市场与中国对外直接投资

基于2003-2018年169个国家的面板数据,文章利用多期双重差分方法探讨了货币互换协议对我国对外直接投资规模与密集度的影响,并通过PSM-DID方法和证伪检验对模型的稳健性进行验证。在此基础上,运用中介效应和调节效应检验方法对货币互换政策的金融市场作用机制进行分析。研究发现,货币互换协议对我国OFDI规模与密集度均有显著积极影响;预期汇率风险是货币互换协议促进我国OFDI的重要影响机制,中介传导而非调节效应是主要影响渠道,而利率市场的影响机制尚未发挥作用。在经济全球化和复杂的国际形势下,这一研究对我国进一步推动国家间金融领域深化合作和推进人民币国际化以畅通国内国际双循环具有重要参考价值。     

中国经常项目顺差的影响因素研究——基于双缺口模型的实证分析

文章在双缺口模型的基础上,进一步分拆模型去寻找影响私人部门储蓄-投资缺口进而影响我国经常账户余额的因素。并且对人均GDP、政府部门的财政余额、对私人部门投放的信贷余额、一国的实际利率以及抚养比率这五项指标进行协整检验和格兰杰因果检验;并建立VAR模型,分析其脉冲响应函数和方差分解结果。实证结果揭示了以上因素对我国经常项目余额的长期影响方向和短期变动的特点。     

Impact of financial development on domestic investment: Evidence from West African countries

This paper investigates the effect of financial development on domestic investment in West African countries. The study uses data from 1985 to 2019 and employs the pooled mean group technique. The main finding of the study is that financial development has a positive effect on domestic investment in the long run but an insignificant effect in the short run. Furthermore, remittances, real GDP per capita and trade openness increase investment rate. The results of causality tests support the view that investment is a channel through which financial development stimulates economic growth. Therefore, it is reasonable for the selected countries to formulate policies that promote domestic credit to the private sector in order to ease liquidity constraints and increase investment and economic growth.     

The myths,facts, and theories of ethnic,small-scale enterprise financing

This article combines the results of three financial studies that examine capital issues affecting minority business development. The results are presented so as to explain or refute conventional wisdom regarding capital availability, cost of capital, credit market discrimination, sources of capital and differences in firm capital composition. Generally, Asian and Hispanic businesses more approximate nonminority businesses in the sources of capital, the cost of capital, total capital investment, and access to capital. Black firms, on the other hand, face credit discrimination from all sources of capital, which limits their access to capital, increases its cost, and affects firm profitability. Consequently, black firms have a smaller capital composition at startup and during operations. The only deviation from this pattern occurs where minority and nonminority financial institutions vie for black business patronage by reducing the cost of borrowing and increasing the availability of funds.     

Capital Markets and Capital Formation in Australia, 1945–1990

This survey article continues the author's examination of the interaction between domestic capital markets and capital formation by studying the 45 years after the end of World War II. (Part 1 appeared in AEHR 37 (3) 1997.) The significant rise and the sustained increase in the ratio of gross domestic capital formation to gross domestic product (GDP) posed challenges to local deposit taking institutions and capital markets to mobilize savings. The changing balance between public and private investment, and between investment by businesses and households, was reflected in the relative importance of government and private debt, and equity. The capital markets and financial institutions proved themselves to be adaptable enough to finance more than 90 per cent of postwar capital formation. However, the increasing inward and outward flows of foreign direct investment have weakened the nexus between the supply of domestic savings and capital formation.     

Financial stability gap and private investment nexus: Evidence from sub-Saharan Africa

The illiquidity status of financial institutions widens up the financial stability gap, hence affecting other economic agents that depend on the financial sector. The objective of the study is to determine how the financial stability gap affects private investment in sub-Saharan Africa (SSA). Annual time series secondary data from 33 SSA countries for the period 2007–2018 was used. Using the general methods of moments (GMM) estimation technique, we found that the financial stability gap beyond 109.9% becomes detrimental to private sector investment while government effectiveness and investment by the government improve private investment. The study recommends that financial institutions undertake liquidity protection measures as a means of protecting the stability status, while SSA governments invest in the economy and provide the needed business environment for private sector investment.     

Interdependence of ASEAN-5 Stock Markets from the US and Japan

Abstract

During the 12 years since 1992 when people started to use the dollar as a currency in Cambodia, the share of the dollar has reached more than 70% of the total currency. This dollarization phenomenon has resulted in large seigniorage losses for the Cambodian government. The costs are estimated up to US$682 million at the end of 2004 with an additional US$61 million lost annually. Furthermore, there are many other kinds of costs caused by the side effects of seigniorage loss. Without siegiorage, some monetary, fiscal and foreign trade policies are no longer available. Worsening the distortion of income distribution is another side effect. These are major costs of dollarization over the direct seigniorage loss. The benefits of dollarization include stabilizing price levels and lowering the risk of national default during a foreign currency crisis. It is not difficult to conclude that the costs of dollarization outweigh the benefits.

There are two de-dollarization methods. One is a policy that prohibits people from using the dollar as a currency by law. The other is the policy that widens the difference of the costs and the benefits of using dollars, also by law. Either method is applicable but it seems reasonable that the method of prohibition by direct law would be more effective and efficient than the other method, since 84% of the total population exclusively uses the riel in Cambodia.

It is totally dependent on the decision of the Cambodian government whether or not a de-dollarization policy is adopted. The results of the decision, for good or ill, will rest finally with the people of Cambodia.     

GOVERNANCE INSTITUTIONS AND PRIVATE INVESTMENT: AN APPLICATION TO THE MIDDLE EAST AND NORTH AFRICA

This paper addresses the issue of the low level of private investment in the Middle East and North Africa (MENA) region, with special emphasis on the role of governance. Based on the existing published reports, we categorize what types of governance institutions are more detrimental to entrepreneurial investments. We then estimate a simultaneous model of private investment and governance quality where economic policies concurrently explain both variables. Our empirical results show that governance plays a significant role in private investment decisions. This result is particularly true in the case of “administrative quality” in the form of control of corruption, bureaucratic quality, investment‐friendly profile of administration, law and order, as well as for “political stability.” Evidence in favor of “public accountability” is also found. Our estimations also stress that structural reforms like financial development, trade openness, and human development affect private‐investment decisions directly, and/or through their positive effect on governance.