Credit policy,real exchange rate volatility and moral hazard

We extend the well-developed theoretical literature on unconventional credit policy from a closed economy to a small open economy. Consistent with the literature, we find that credit policy has positive effects on output and consumption by raising investment demand. In terms of expanding output, it is more effective to extend government credit to banks than to the goods-producing sector because for each unit of credit supplied to banks, banks - through leverage - can supply greater than one unit of intermediation to firms. We find the welfare implications are ambiguous and depend on the type of policy chosen. A policy of providing funds to goods-producing firms tends to be welfare-improving because it dampens the responses of all variables after a negative shock, including the real exchange rate. However, providing government assistance to the banking sector may be a costly policy because it encourages greater risk-taking on part of banks, leading to higher bank leverage. All else equal, this increases the volatility of the economy, raising the variances of consumption and of the real exchange rate, which is welfare-deteriorating. We interpret this as indicative of the problem of moral hazard associated with a policy of providing support to failing banks.     

Structural change through exchange rate policy

Zusammenfassung Strukturwandel durch Wechselkurspolitik. -Dieser Aufsatz untersucht, ob und wie die Wechselkurspolitik Produktivit?t und Qualit?t industrieller Produkte beeinflu?t. Anhand ?sterreichischer Daten wird gezeigt, da? Aufwertungen des Schillings die strukturelle Anpassung im ?sterreichischen Exportsektor begünstigt haben. In den siebziger Jahren haben reale Aufwertungen die Produktivit?t erh?ht und die Produktqualit?t verbessert, weil die Firmen ihre Wettbewerbsf?higkeit aufrechterhalten wollten. Es wird gezeigt, da? dies im Einklang mit dem Produktzyklusmodell und dem Modell des importinduzierten Wachstums steht, welche eine positive Beziehung zwischen dem Wechselkurs und der nicht durch den Preis bestimmten Wettbewerbsf?higkeit nahelegen.

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Résumé Changement structurel par la politique de taux de change. -Cet article explore l'influence de la politique de taux de change sur la productivité industrielle et la qualité des produits. Il est démontré par des données autrichiennes que les révalorisations du schilling ont favorisé l'ajustement structurel dans le secteur exportatrice autrichien. Pendant les années soixante-dix les révalorisations réels ont mené à une productivité plus haute et amélioré la qualité des produits parce que les entreprises cherchaient à maintenir leur capacité concurrentielle. Suivant l'auteur cela se trouve en conformité avec le ?product-cycle? modèle et le ?import-led-growth? modèle suggérant une relation positive entre le taux de change et la capacité concurrentielle non-prix.

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Resumen Ajuste estructural através de la política cambiaria. -Este trabajo explora el efecto de la política de cambios sobre la productividad industrial y la calidad de los productos. Utilizando datos austríacos se muestra que las revaluaciones del tipo de cambio favorecen el ajuste estructural en el sector exportador austríaco. En los a?os setenta, las revaluaciones del tipo de cambio contribuyeron a aumentar la productividad y a mejorar la calidad de los productos, dado que las empresas estaban preocupadas por mantener su margen competitivo. Esto concuerda con la teoría del ciclo del producto y con el modelo de crecimiento inducido hacia las importaciones, que sugiere la existencia de una relación positiva entre el tipo de cambio y la competitividad no basada en el precio.

     

Real exchange rate appreciation,resource boom,and policy reform in Myanmar

Over the six‐year period 2006‐11, the real exchange rate of the Myanmar kyat appreciated 200 per cent, resulting in the value of the US dollar in Myanmar falling to one‐third of its pre‐2006 level. While the resource boom is suspected to be the source of the real exchange rate appreciation, administrative controls on foreign exchange and imports had much more impact. Foreign exchange controls limited the convertibility of the kyat to foreign currencies and spurred negotiated transactions of foreign exchange outside the banking sector, hampering the foreign exchange market interventions of the government and Central Bank. Import controls repressed imports, aggravating excess supplies of foreign exchange. Relaxation of administrative controls is necessary for moderating currency appreciation.     

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.     

The effects of inflation on the predictability of price changes in Latin America: Some estimates and policy implications

This paper argues that the relationship between price variability and inflation in high-inflation countries should be estimated on a frequent basis and that rational expectations are the appropriate formulation for predicting inflation. Analysis of seven Latin American countries, taking these factors into account, suggests that higher inflation contributes to the difficulty of predicting price changes. The impact is more moderate than that found in previous studies, however, indicating that less concern may be warranted about the possible stagflationary effects of expansionary policies.     

Real exchange rate, agglomerations, and irreversibilities: macroeconomic policy and FDI in EMU

Fiscal policy in EMU has to be evaluated in the light of thechanging nature of capital mobility in Europe and its effectson growth. Most arguments about the effects of fiscal policyin EMU assume that we live in a perfect competition world witha unique natural rate of output for each country. The removalof barriers to foreign direct investment (FDI) accompanied bythe prevalence of imperfect competition mean that the naturalrate of output is to be determined by locational competition.We show that FDI is influenced by relative costs and is attractedby agglomerations, and that the level of technology dependson the stock of FDI. Sustained expansionary fiscal policieswill raise costs and make locations less attractive. Agglomerationscould be destroyed by these higher costs, and the size of thenation will shrink. These effects will constrain policy-makersmuch more than the Stability Pact.     

论中国汇率政策与关税政策的搭配

中国加入世界贸易组织(WTO)以后,必须按照WTO的规则大幅度地降低关税,这势必给国内经济均衡带来巨大冲击。而汇率政策作为调节国内外经济的重要手段,如何在缓解这一冲击中发挥作用值得研究。本文对1994～2004年中国汇率政策与关税政策之间的搭配进行了实证研究,并提出了改善这两大经济政策搭配的对策建议。     

货币政策与汇率关联的实证研究

本文从五个方面对国内外货币政策与汇率关联的实证研究方面的文献进行了回顾。借鉴国外的研究方法,利用较高频、更长、更新的时间序列数据,并考虑变量之间存在的联立关系,对我国情况做进一步的研究。     

中国汇率政策与财政政策的搭配研究

近年来,中国的失业问题引起了社会各界的广泛关注,政府也出台了多项改革措施,目的是为了维持宏观经济内部均衡。但是,随着我国进出口顺差的持续增大,用于调节外部失衡的人民币汇率政策却一直没有调整。因此,这两者搭配是否合理值得研究。本文对中国汇率政策与财政政策的搭配进行实证分析,并提出了改善这两大经济政策搭配的对策建议。     

Monetary policy,exchange rate targeting and fear of floating in emerging market economies

This paper investigates whether central banks in emerging markets systematically respond to exchange rate movements. It estimates a structural general equilibrium model of a small open economy with an exchange rate-augmented Taylor-type rule for four countries. The results show that over the entire sample-period, South Africa and Mexico do not target the exchange rate, whereas Indonesia and Thailand do. In the 1980s and 1990s, all four countries targeted the exchange rate but in the aftermath of the Asian financial crisis, the Mexican peso crisis, and the end of apartheid, they all liberalized their exchange rate regimes, shifting toward inflation targeting.     

Inflation and Welfare in Latin America

This paper follows Bailey (J Polit Econ 64:93–110, 1956) and Lucas (Econometrica 68:247–274, 2000) and estimates the welfare cost of inflation for 17 Latin American economies. We use annual data, from 1955 to 2000, and recent advances in the field of applied econometrics to estimate the inflation rate elasticity of money demand and report significantly high and differential welfare cost estimates for these economies.     

Financial market integration,exchange rate policy,and the dynamics of business and employment in Korea

We study the consequences of different degrees of international financial market integration and exchange rate policies in a calibrated, medium-scale model of the Korean economy. The model features endogenous producer entry into domestic and export markets and search-and-matching frictions in labor markets. This allows us to highlight the consequences of financial integration and the exchange rate regime for the dynamics of business creation and unemployment. We show that, under flexible exchange rates, access to international financial markets increases the volatility of both business creation and the number of exporting plants, but the effects on employment volatility are more modest. Pegging the exchange rate can have unfavorable consequences for the effects of terms of trade appreciation, but more financial integration is beneficial under a peg if the economy is subject to both productivity and terms of trade shocks. The combination of a floating exchange rate and internationally complete markets would be the best scenario for Korea among those we focus on.     

Unemployment in Latin America and the Caribbean

This study constructs a new data set on unemployment rates in Latin America and the Caribbean and then explores the determinants of unemployment. We compare different countries, finding that unemployment is influenced by the size of the rural population and that the effects of government regulations are generally weak. We also examine large, persistent increases in unemployment over time, finding that they are caused by contractions in aggregate demand. These demand contractions result from either disinflationary monetary policy or the defense of an exchange-rate peg in the face of capital flight. Our evidence supports hysteresis theories in which short-run changes in unemployment influence the natural rate.