International dollar liquidity and the Eurodollar market

Summary Transactions of Eurodollar banks affect international dollar liquidity (and the US payments balance) exactly as would identical transactions of US banks. Eurodollar banks are, however, usually more likely to grant credits to foreigners than US banks, and thus to raise foreign gross (thought not net) dollar liquidity. In times of international dollar glut, an expansion of the Eurodollar market (e.g., through shifts of deposits from US to Eurodollar banks or through US banks repaying Eurodollar borrowings) thus tends to aggravate unwanted dollar flows to foreign central banks and the US reserve transactions (though not the net liquidity) payments deficit.This paper is a by-product of the author's contribution to the study Foreign Dollar Balances and the International Role of the Dollar, conducted jointly with Professor Raymond F. Mikesell and sponsored by the National Bureau of Economic Research. Neither Professor Mikesell nor the National Bureau (nor the Foreign Service Institute) bears, however, any responsibility for the views expressed in this paper.     

Japanese vocal intervention and the yen/dollar exchange rate

This paper examined the patterns of Japanese vocal intervention and its influence on the yen/dollar exchange rate using the daily data between January 2000 and August 2003. The major findings of this paper are as follows. First, vocal intervention that is leaning against the wind was found to be successful as opposed to lean-with-the-wind intervention which had mixed results in its effectiveness. Second, vocal intervention turned out to be more effective when it was intended for yen depreciation than for yen appreciation. Third, in the cases of leaning against the wind and yen depreciation intended interventions, the Japanese authorities normally relied on vocal intervention and engaged in actual intervention only when repeated vocal intervention proved ineffective.     

Decentralization and coordination: China's credible commitment to preserve the market under authoritarianism

This paper addresses the political economy of development in the context of economic catching-up. Specifically, we conducted a literature review and proposed a framework to examine how China has been able to achieve double-digit annual growth in the last two decades despite the general absence of democracy, rule of law, and private property rights. We find that similar to other East Asian catching-up economies, China is at the stage of a market-preserving authoritarianism. International and domestic competitive pressures and experiences led Deng and other senior leaders to preserve the market for catching-up. Economic decentralization and autonomy on the one hand, and political control and coordination on the other hand, made the policies to preserve the market under authoritarianism largely credible.     

The dollar in the turmoil

We study the impact of the global financial crisis on the equilibrium exchange rate of the US dollar. We first simulate the impact of the crisis on the US net foreign asset position. Then, we calculate the equilibrium value of the dollar according both to a BEER and to a FEER approach. We find the case for a strong, although temporary, depreciation of the dollar even more acute than before the crisis. This suggests that the strength of the dollar in late 2008 and early 2009 may be short-lived.     

A structural break in the effects of Japanese foreign exchange intervention on yen/dollar exchange rate volatility

We study the impact of Japanese foreign exchange intervention on the volatility of the yen/dollar exchange rate since the early 1990’s in a GARCH framework with interventions as exogenous variables. Using daily intervention data provided by the Japanese Ministry of Finance, we show that the effect of interventions varies over time. From 1991 up to the late 1990’s, Japanese foreign exchange intervention is associated with an increase in volatility of the yen/dollar exchange rate. After the year 1997, Japanese foreign exchange intervention correlates with reductions in exchange rate volatility. This can be explained by the fact that Japanese foreign exchange intervention remained quasi unsterilized in the liquidity trap.

The ASEAN dollar standard in the post-crisis era: A reconsideration

This paper examines the role of global currencies in ASEAN exchange rate regimes. The investigation considers the post-crisis era from January 1, 1999 through December 31, 2007 and focuses on the five original members of ASEAN (Indonesia, Malaysia, Philippines, Singapore, Thailand) plus Vietnam. Unlike most papers that use classical regression analysis of logarithmic data in first differences to detect the influence of various foreign currencies on particular Asian currencies, this paper considers modern time series analysis more seriously. In particular, this paper finds evidence of cointegration among individual ASEAN currencies and some of the global currencies, indicating a long-run relationship. Examination of the cointegrating vectors yields four main findings. First, there is a notable absence of a clear US dollar standard. Second, the yen is downright unimportant, suggesting that ASEAN currencies are quite far from a yen standard. Third, ASEAN currencies are also quite far from a euro standard. Fourth, and most surprisingly, the UK pound is very important. These results are at odds with the traditional (short-run) regressions which suggest that ASEAN is on a dollar standard, although it is not a perfect dollar standard because coefficients are not at unity and various other currencies are significant in different equations. Hence, the overall conclusion from this research is that there is a wide variety of influences on ASEAN exchange rates in both the long run and the short run. This suggests that ASEAN, as a group, is not pursuing – and is in fact not ready for – a global-currency standard.     

Empirical evidence on foreign exchange market intervention: Where do we stand?

Zusammenfassung Empirische Befunde zur Intervention auf den Devisenm?rkten. Wie ist der Stand der Dinge? — Die Autoren geben einen überblick über 15 empirische Studien, in denen die Ziele untersucht werden, die die Zentralbanken bei ihren Interventionen auf den Devisenm?rkten verfolgen. Die neueren Studien gehen über die übliche Verifikation des “leaning against the wind”-Verhaltens hinaus. Es zeigt sich, da\ die interventionistischen Reaktionen davon abh?ngen, ob sich eine W?hrung aufoder abwertet und ob sie im Vergleich zur Kaufkraftparit?t überoder unterbewertet ist. Au\erdem werden zehn empirische Studien, die die Wirksamkeit von Interventionen untersuchen, betrachtet. Anscheinend haben nur Interventionen mit einem ausreichenden Informationsgehalt eine Chance, den Wechselkurs zu beeinflussen.

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Résumé Des preuves empiriques sur l'intervention au marché des changes: où est-ce que nous nous trouvons? — Dans cette étude les auteurs font un aper?u de 15 études empiriques exécutées pour déterminer quels buts les banques centrales ont poursuivi avec leurs interventions au marché des changes. Les études les plus récentes ont réalisé plus que la vérification du comportement ?leaning against the wind?. On trouve que les réactions des banques centrales en fa?on d'une intervention dépendent de la direction que le cours du change va prendre (réévaluation ou déévaluation) et de la disparité entre le cours du change et la parité du pouvoir d'achat. En plus on a réexaminé 10 analyses empiriques concernant l'efficacité de l’intervention. Seulement les interventions qui contiennent beaucoup de nouvelles semblent avoir une chance d'influencer le taux de change.

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Resumen Evidencia empirica de la intervención en el mercado de cambios: ?dónde estamos parados? — Este trabajo pasa revista a quince estudios empiricos que han sido llevados a cabo con el fin de determinar qué objetivos persiguem los bancos centrales con sus intervenciones en el mercado de cambios. Los estudios mas recientes van más alla de la usual verificación de un actividad “en contra del viento”. La respuesta en forma de intervención resullta depender de si una moneda se encuentra en una revaluation o en una devaluación y de si esta subo sobrevaluada con respecto a la paridad del poder de compra. Además, se revisan diez investigaciones empiricas sobre la efectividad de la intervención. Sólo intervenciones que incorporan un contenido de informaciones suficiente parecen tener una oportunidad de afectar a la tasa de cambio.

     

What has foreign exchange market intervention since the Plaza Agreement accomplished?

We review the conduct and scale of official intervention by monetary authorities in the U.S.A., Japan, and West Germany since the Plaza Agreement. Relative to trading volume and the stock of internatonally traded assets denominated in foreign currencies, intervention is small-scale and sporadic, hence at best limited to transitory effects. It does not appear to reduce volatility of daily exchange rates. Monetary authorities gamble that they will not suffer losses on their foreign currency holdings. Evidence in favor of sterilized foreign exchange market intervention as a way of conveying information to the private sector is far from convincing. Since changes in relative monetary growth rates are sufficient to alter bilateral exchange rates, monetary authorities can achieve their exchange rate preferences with domestic monetary policy, but at the cost of possible distortionary effects on monetary growth rates, domestic interest rates, and international capital flows.     

The economics of market coordination for the pre-Fed check-clearing system: A peek into the Bloomington (IL) node

On the basis of anecdotes centered on the alleged “circuitous routing of checks,” researchers focusing on the pre-Fed check-clearing system have usually argued that it was inefficient. In this paper we study a 1910 check remittance register from the State National Bank of Bloomington, Illinois—we dissect the way the bank forwarded checks to various destinations for clearing and collection. We find that the bank followed an orderly process of check remittance according to which checks tended to move in the “right direction.” This casts doubts on the alleged pervasiveness of cycling and circuitous routing of an extreme nature in the pre-Fed check-clearing process.     

拉丁美洲：一个富有活力的市场

在经过“失去的1980年代”、“好不到哪儿去的1990年代”后，近几年，拉丁美洲进入了40多年来最好的发展阶段，拉美的经济增长强劲，通货膨胀得到控制，外汇储备稳定增长。根据联合国拉美经委会统计数据显示，2003-2006年，拉美的GDP共增长了17．6％，平均每年增长4．3％。早在20世纪70年代，中国就已经与很多拉美国家建立、巩固和发展了外交关系。     

Rise of the gold market in China: liberalisation and market development

The Chinese gold market is rapidly rising to global prominence in the recent decades. The paper reviews the history of the gold market in China and its liberalisation process amid the country’s opening to the outside world. Details of the current market structure and its main business are presented. Global impacts of the rise of the Chinese gold market are discussed.     

Does market power affect performance in the dutch banking market? a comparison of reduced form market structure models

This paper investigates whether reduced form market structure models can be used to test whether there is market power in the Dutch banking market. First, a traditional Structure-Conduct-Performance (SCP) model is introduced. Next, a simple Cournot-model is introduced, which results in a more flexible measure of market power for different market structures. Finally, the inclusion of a modified Efficiency hypothesis reduces identification problems. Theoretically speaking, the Cournot model provides a better foundation for testing the existence of market power than the SCP model. Likewise, explicitly correcting for and including efficiency results in a more correct test of the Efficiency hypothesis. Empirical results for Dutch data confirm that the introduced improvements based on the Cournot models are the only ones resulting in tests that are consistent with the underlying models. Evidence from the Cournot model suggests that we cannot reject the existence of market power, although its impact on performance may be small. It also formalizes the need for additional research into the importance of strategic interaction among banks.     

Population policy in South Africa: a critical perspective

The argument in this article is that population growth and the concept of balancing resources against population growth is flawed when the context, in this case South Africa, is gross inequalities in resource distribution. The fact is that causes of poverty are located in the social and political structures which give people unequal access to existing resources or international aid. Population trends reflect the mode of production of that society. It is argued that the Malthusian law of population and the theory of demographic transition is ahistorical and inaccurate. The theory does not explain why population growth rates change. In South Africa, fertility reflects lack of control over one's life and poverty. Migrant labor in South Africa undermined normal social institutions and disrupted family life. Government has emphasized a fear of a future population crisis because of resource shortages and a fear of the growing black population. The South African population development program is extracted and discussed. Questions are raised about the theory of demographic transition, the way resource allocation is ascertained, the relationship between resources and population in a specific area, and the relationship between population growth and development in general. The theory of demographic transition is examined and the Western influences which contributed to population growth through requests for changes in sexual mores and the effects of colonization. When demographic transition theory postulates that mortality rates decline with industrialization as a result of access to medical care and an improved diet, it doesn't take into account the discriminatory health care allocation under apartheid, or the displacement of rural people from their land and undermining of the rural peasantry. Separate development has led to inferior schooling and lack of access to skilled employment. In discussing the availability of resources in South Africa, the question is raised as to whether there is an absolute limit to water, or whether water management or water conservation is at issue, as in the case example of the Transkei. What is economical reflects political decisions about national priorities when consideration is given to alternative strategies for increasing the water supply, or solving pollution problems. The potential to feed South Africans is substantiated, and the problems of maldistribution identified. In establishing the balance between family planning and development, the Population Development Program (PDP) expresses contradictory aims; i.e., seeking community involvement of a politically disenfranchised population. The concept of overpopulation and the application of population control programs in South Africa does not address the problems of poverty and powerlessness.