Macroeconomic Policy, Exchange Rate Regimes and Economic Growth

China has been keeping high economic growth rate since it carried out managed floating exchange rate regimes in 1994, while now begins to face retrenchment pressure brought by the depression of internal and external economy. The establishment of RMB exchange rate regime should take account of the validity of macroeconomic policy, macroeconomic growth and the regional internationalization of RMB.     

Testing the Unstable Middle and Two Corners Hypotheses About Exchange Rate Regimes

The recent rash of international currency crises has generated considerable interest in the role that exchange rate regimes have played in contributing to these crises. Many economists have argued that efforts to operate adjustably pegged exchange rate regimes have been a major contributor to “the unstable middle” hypothesis and some have argued that this unstable middle is so broad that only the two corners of hard fixes or floating rates will be stable in a world of high capital mobility—the two corners or bipolar hypothesis. Two recent empirical studies by researchers at the International Monetary Fund reach opposing conclusions on these issues. We examine the issue further and show that conclusions can be quite sensitive to how exchange rate regimes are grouped into categories and the measures of currency crises that are used. In general we find that the dead center of the adjustable peg is by far the most crisis prone broad type of exchange rate regimes, but that countries need not go all the way to freely floating rates or hard fixes to substantially reduce the risks of currency crises.

Exchange Rate Pass-through,Unemployment and Optimal Implementable Monetary Policy Rule for Emerging Economies

Abstract

This paper develops a small open economy model with nominal rigidities and search-matching frictions to study the implications of exchange rate pass-through for monetary policy in emerging countries. I find that, with complete exchange rate pass-through, the optimal policy rule features unemployment targeting as well as inflation targeting. However, the welfare gain from responding to unemployment fluctuations diminishes as the rate of exchange rate pass-through to import prices decreases. With low exchange rate pass-through, the optimal monetary policy is strict inflation targeting.     

Exchange Rate Regime and Demand for Reserves: Evidence from Kenya,Mexico and Philippines

This paper empirically investigates the demand for international reserves (and foreign exchange reserves) during fixed and floating exchange rates periods in three developing countries: Kenya, Mexico and Philippines. Based on theoretical models, three factors are identified as important for the demand of international reserves and foreign reserves: average propensity to import, volume of imports and variability of reserves. The paper employs the cointegration methodology and error correction method to investigate the relationships. Cointegration tests results indicate a reliable long-run stationary relationship between the international reserves (and foreign exchange reserves) and the stated explanatory variables across countries and sub-periods of fixed and clean float. The error correction results indicate causality from the explanatory variables to the reserves during both the short and long run. This is true during both the fixed and the floating periods.

Exchange Rate Regimes: Middling Through

Abstract

The appropriate exchange rate regime, in the context of integration of currency markets with financial markets and of large international capital flows, continues to be a policy dilemma. It is found that the majority of countries are moving towards somewhat higher exchange and lower interest rate volatility. Features of foreign exchange (forex) markets could be partly motivating these choices. A model with noise trading, non-traded goods and price rigidities shows that bounds on the volatility of the exchange rate can lower noise trading in forex markets; decrease fundamental variance and improve real fundamentals in an emerging market economy (EME); and give more monetary policy autonomy. Central banks prefer secret interventions where they have an information advantage or fear destabilizing speculation. But in the model discussed in this article, short-term pre-announced interventions can control exchange rate volatility, pre-empt deviations in prices and real exchange rates, and allow markets to help central banks achieve their targets. The long-term crawl need not be announced. In conclusion, the regime's applicability to an EME is explored.     

Limited Reserves and the Optimal Width of an Exchange Rate Target Zone

This paper analyses the stabilising properties of an exchange rate target zone when the stock of available reserves is limited. In these circumstances it is reasonable to suppose that the optimal bandwidth is affected by the expected lifetime of the zone. Our analysis uses Sutherland’s (1995) target zone model to assess the importance of the expected lifetime in determining the optimal width of the zone. We find that the expected lifetime tends to widen the optimal bandwidth considerably but unless the stock of initial reserves is small and/or the fundamentals drift large, the extra lifetime bought is small in percentage terms.     

Devaluation,Debt, and Default in Emerging Economies

We explore the interactions between exchange rate and fiscal policy, and default on external debt. Exchange rate policy affects the supply of short-term debt facing the government. Under a conventional soft peg, it can be optimal for the government to set the exchange rate at a level in which partial default occurs. In this case multiple equilibria exist, with one featuring high interest rate, overvalued exchange rate, low level of output, and default. Default is also an equilibrium under a hard peg, precisely because devaluation is not an option. Under a hard peg, however, there is a unique equilibrium.

Exchange Rate Expectations,the Forward Exchange Rate Bias and Risk Premia in Target Zones

Expected rates of depreciation within the target zone for the exchange rates of four Nordic countries during 1979–1989 are estimated. Combining these with expected rates of devaluation estimated by Edin and Vredin (1993) we obtain time-series of the overall expected exchange rate change. We can thus construct time-series of foreign exchange risk premia and expectational errors, following which we decompose the forward exchange rate bias into portions attributable to expectational errors and/or risk premia. The conclusion is that time-varying risk premia appear to be the dominant cause of deviations from uncovered interest parity while the role of expectational errors is less clear.     

Central Bank Autonomy,the Exchange Rate Constraint and Inflation: The Case of Italy, 1970–1992

This paper analyzes the determinants of inflation in Italy over the period 1970–1992. Particular emphasis is placed on the role of central bank independence in influencing monetary growth, and on the role of monetary growth and of the Exchange rate Mechanism (ERM) in affecting inflation. In the 1970s and early 1980s, when the Bank of Italy lacked independence and the ERM was still not credible, monetary growth was highly unstable and was the main determinant of Italian inflation, although oil price and tax shocks also played a role. After the March 1983 general exchange rate realignment and the French U-turn, the ERM became more credible and monetary growth stopped being a significant determinant of inflation; instead, the German inflation became the main variable influencing Italian inflation.     

Swiss Exchange Rate Policy in the 1930s. Was the Delay in Devaluation Too High a Price to Pay for Conservatism?

In this paper we examine the experience of Switzerland’s devaluation in 1936. We ask the following questions: what were the issues at stake in the political debate? What was the cost to Switzerland of the delay in the franc devaluation? What would have been the costs and benefits of an earlier exchange rate policy? To answer these questions we construct a simple open economy macro model of the interwar Swiss economy. We then posit counterfactual scenarios of alternative exchange rate pegs in 1931 and 1933. Our simulations clearly show a significant and large increase in real economic activity.     

On the feasibility of a regional exchange rate system for East Asia: Lessons of the 1992/1993 EMS crisis

This paper argues that a regional exchange rate system such as the EMS should not be ruled out when discussing monetary options for East Asia. The paper recalls that the 1992/1993 EMS crisis was the crisis of an exchange rate system and not just the collapse of unilateral pegs pursued by individual countries. It discusses distinct features that add to the credibility of regional exchange rate systems and reasons that a system that is built around well-defined rules and which is managed very carefully and cooperatively according to those rules could be both credible and sustainable even in the 21st century.     

“三元悖论”与人民币汇率制度选择

“三元悖论”从宏观上揭示货币政策独立性、汇率稳定、资本自由流动三大金融目标之间的相互制衡关系, 是汇率制度选择问题的一个基本理论分析工具。我国现行的汇率制度实质上是钉住美元的固定汇率制,在金融进一步开放的背景下,其弊端日益凸现,改革现行的汇率制度势在必行。我国现实经济条件决定了我国汇率制度改革的近期目标只能是建立汇率目标区,长期目标则是建立浮动汇率制。     

Monetary and Fiscal Policy Interaction in the Euro Area with Different Assumptions on the Phillips Curve

In this paper we apply a static version of a New Keynesian macromodel to a monetary union (see Bofinger et al., J Econ Educ, 37:98–117 (2006), Walsh, J Econ Educ, 33:333–346 (2002)). We show in particular that a harmonious functioning of a monetary union critically depends on the correlation of shocks that hit the currency area. Additionally a high degree of integration in product markets is advantageous for the ECB as it prevents national interest rates from driving a wedge between macroeconomic outcomes across member states. In particular small countries are in need for fiscal policy as an independent stabilization agent with room to breath.

转型、经济增长与动态财政政策——Zou(1996)两步法

本文在Zou (1996)的框架基础上,通过内生政府支出,并且将生产性支出设定为存量,求解一个含有私人消费、公共消费、私人资本存量和公共资本存量的动态系统。结论表明,存在一个最优资本产权结构,使得经济能够登上平衡增长道路。与Barro（1990）等不同的是,本文的模型将转型与经济增长紧密联系起来,用资本产权结构的动态变化来表征经济的转型过程,进一步地,财政政策的动态学也有了市场基础。     

东亚的美元本位:影响和汇率协调及我国的对策

在以美元为主导的国际货币体系框架下,东亚地区事实上处于美元区内,没有自己的货币定价权。为了克服美元本位制度的弊端和对美元依赖造成的负面影响,东亚地区需要积极开展汇率协调或汇率合作,为本地区的经济发展营造良好稳定的宏观环境。我国应该积极参与东亚外汇储备库的建设,稳步推进人民币的区域化和国际化的步伐,以积极主动的姿态,参与东亚国家的汇率协调与合作。     

开放经济货币政策动态下人民币汇率问题研究

文章以汇率超调模型及其拓展为基础,突出货币供求(Ms-Md)与宏观经济短期波动的总供求(AS-AD)关联运行的作用机理,结合非线性宏观金融理论在货币供需分析中引入可交易金融资产,在资本管制货币扩张下,对人民币名义汇率动态进行综合判断。在此基础上进行实证研究,突出指示器变量的作用,为人民币汇率动态提供经验支持。通过建立指示器指标之间的线性回归关系,在货币需求方程的协整分析基础上,反解出货币供求均衡条件下所形成与宏观经济总供求相合意的名义汇率,即把反映宏观经济总供求运行的均衡货币因素代入指示器指标之间OLS关系中,反解出均衡水平下的合意名义汇率,结果表明从自身而言,人民币不具备升值诉求。     

Exchange Rate Cycles and Canada/US Manufacturing Prices

The paper examines the industry characteristics that are related to the shifts in competitiveness, measured as the relative common-currency price ratios between Canadian and US manufacturing prices. We find that relative input costs and relative productivity growth are the two most important factors influencing changes in relative Canada/US prices. Competitive pressures emanating from trade are important determinants of the extent to which relative productivity differences are passed through to cross-country relative prices. We also find that the magnitude of domestic market competition and export intensity affects the short-run relative price shifts over the cycle of exchange rate. JEL no. E30, F31, L60     

Target zones and wealth effects: Current account implications of alternative policy assignments

This paper evaluates the current-account implications of coordinated disinflationary policy in a two-country framework, when fiscal policy is assigned to control inflation and monetary policy is used to hold down the exchange rate at its target zone level. The performance of an alternative regime, where monetary policy controls inflation and fiscal policy is assigned to control the current account is also assessed.