International Markets and Open Economy Macroeconomics: a Keynesian view

This paper attempts to sketch a Keynesian response to the gap between the reality of international capital markets and the ‘standard paradigm’ of economic theory that underpins the policy model offered to poor countries in relation to their participation in the world economy and their national macroeconomic management. Recent work on imperfect markets, much of it from self-styled ‘New Keynesian’ point of view, implies a substantial modification of this standard paradigm to allow for non-price clearing but this does not appear to to have been integrated with new trade theories, while the implications of systemic volatility and credit rationing behaviour have not been theorized. The paper suggests that a return to Keynes's original approach to investor uncertainty and global demand might not only help to integrate international macroeconomic theory in a plausible manner but also contribute to the foumulation of more desirable policy positions.     

我国建立开放性黄金交易市场的可行性分析

黄金交易是国际金融市场体系中的一个重要组成部分。我国已经建立起了货币、证券和外汇金融体系,开放了黄金饰品市场。随着经济的发展和改革开放的深入,我国建立开放的与国际接轨的黄金市场迫在眉睫。本文从世界黄金市场的发展规律、我国现阶段社会经济发展水平等方面分析了建立开放的黄金交易市场的必要性,从黄金供求关系等方面论述了建立开放性黄金交易市场的可行性,并提出了建立我国黄金市场的一些设想。     

略论中国外汇储备面临的潜在资本损失

本文分析了中国巨额外汇储备面临的由本币升值汇率风险而导致的资本损失。文章从两个角度来研究该项损失:一是从央行资产负债表由于货币错配而招致的现实以及潜在资本损失的角度;二是从以一篮子货币或者一篮子商品来衡量的中国外汇储备国际购买力损失的角度。本文的结论是:中国央行资产负债表面临的资本损失是显著的;中国外汇储备国际购买力的波动显著高于市场价值的波动,尤其是用油价来衡量的外汇储备购买力波动相当剧烈。     

新兴市场国家国际资本流动“突然停止”的影响因素分析--基于金融脆弱性的视角

在金融全球化的背景下,脆弱的国内金融体系会波及国际资本市场,导致国际资本流动发生剧烈波动甚至“突然停止”。运用面板Probit模型考察1976-2012年22个新兴市场国家国际资本流动“突然停止”的影响因素,着重探讨一国金融脆弱性对国际资本流动“突然停止”的影响。实证研究结果表明：一国的金融脆弱性对国际资本流动“突然停止”具有显著的负影响;金融开放会放大一国的金融脆弱程度,进一步提高国际资本流动“突然停止”的发生概率。     

BUSINESS CYCLES IN THE EQUILIBRIUM MODEL OF LABOR MARKET SEARCH AND SELF‐INSURANCE*

I introduce risk‐aversion, labor‐leisure choice, capital, individual productivity shocks, and market incompleteness to the standard model of labor search and matching and investigate the model’s cyclical properties. I find that the model can generate the observed large volatility of unemployment and vacancies with a reasonable replacement rate of unemployment insurance benefits of 64%. Labor‐leisure choice plays a crucial role through additional utility from leisure when unemployed and further amplification from adjustments of hours worked. On the other hand, the borrowing constraint or individual productivity shocks do not significantly affect the cyclical properties of unemployment and vacancies.     

Distance and beyond: What drives financial flows to emerging economies?

A major theme in the empirical literature is whether country-specific ‘pull’ or external ‘push’ factors drive international capital flows. In this paper we show that pull-push interactions matter: the response of international investors to country-specific developments depends on global volatility/liquidity stress conditions. We model asset-trade behaviour of investors: with limited information, strong institutional quality ‘pulls’ asset demand; mounting tensions in global markets amplify portfolio adjustments. We derive an empirically testable equation for cross-border bank flows to emerging economies (EMEs) and focus on pull-push interactions that trigger financial vulnerabilities. We find that global volatility amplifies demand for institutional quality, prior to the recent crisis, implying that EMEs with weak institutional settings are exposed to sharp capital retrenchments. In the aftermath of the crisis, the liquidity easing in advanced economies drives down concerns for EMEs' developments, boosting flows and challenging EMEs' ability to use capital controls to mitigate unbridled flows.     

Gender differences in the volatility of work hours and labor demand

This paper examines the role of heterogeneity in a real business cycle model, which traditionally has not fully captured the relative volatility of hours to output. Men and women have different cyclical volatilities in hours worked, which is robust to different filtering methods. This empirical regularity is used to motivate a standard RBC model augmented to allow for two different agents following Jaimovich et al. (2013). These two agents have identical utility functions, but face different elasticities of labor demand due to their different complementarities with capital. These estimated elasticities find that women are more complementary to capital. The calibrated model generates the cyclical volatility of work hours by gender and for the total hours worked that matches the U.S. data better than the traditional representative agent model. I then explore other extensions to this model including investigating the stability of the estimated labor demand elasticities and allowing for various Frisch elasticities of labor supply. This paper demonstrates that allowing for even broad levels of heterogeneity in a simple framework can increase the model’s tractability with the data. Since gender is important to explain U.S. business cycle dynamics, we need to carefully consider heterogeneity when analyzing counter-cyclical economic policy, as it may not have symmetric effects across assorted groups.     

Are bygones not bygones? Modeling price-level targeting with an escape clause and lessons from the gold standard

Like the gold standard, price-level targeting (PT) involves not letting past deviations of inflation be bygones; both regimes return the price level (or price of gold) to its target. The experience of suspension of the gold standard in World War I and resumption in the 1920s (for some countries at a different parity) is reviewed. It suggests that, in practice, PT might operate with an escape clause that would allow rebasing of the price target in the face of large shocks. Using a calibrated general equilibrium model, we show that such an escape clause can produce multiple equilibria. For some parameterizations, there is a low credibility equilibrium (with high expectation of a reset) associated with high output volatility and frequent resets. These problems reduce, or reverse, the expectational advantage PT has over inflation targeting.     

Foreign Portfolio Equity Investments, Financial Liberalization, and Economic Development

Reform of local capital markets and relaxation of capital controls to attract foreign portfolio investments (FPIs) has become an integral part of development strategy. The proximity of market openings and large, sudden shifts in international capital flows gave credence to the notion that the liberalization was the primary culprit in precipitating the recent Asian crisis. Hence, this paper reassesses the benefits and costs of FPIs from the perspective of the recipients. Specifically, it discusses the various FPI contributions and presents empirical evidence regarding the relationship between FPIs and market development, degree of capital market integration, cost of capital, cross-market correlation and market volatility. It is clear that the evidence on benefits of FPIs is strong, whereas the policy concerns regarding resource mobilization, market comovements, contagion, and volatility are largely unwarranted. The authors make some policy suggestions regarding preconditions for capital market openings, market regulation, and liberalization sequencing.     

Transboundary pollution,tax competition and the efficiency of uncoordinated environmental regulation

Under capital tax competition, surprisingly, Ogawa and Wildasin (2009) find that uncoordinated policymaking leads to a first‐best outcome even in the presence of transboundary pollution. However, I show that if the level of environmental regulation is endogenized, the regulation level becomes too loose compared with the optimum (“race to the bottom”). Thus, despite the efficiency result of Ogawa and Wildasin (2009), efforts to achieve international environmental policy coordination are needed. I then examine the dependence of this result on the level of decisive voter's capital endowment. The regulation is inefficiently loose in many cases, but it can be too strict if the decisive voter's capital endowment is above the average. Thus, the possibility of “race to the top” cannot be eliminated. The inefficiency result does not generally depend on the timing of policymaking, although the efficiency may be restored in the limit case where the decisive voter has no capital at all.     

THE ROLE OF PREFERENCE SHOCKS AND CAPITAL UTILIZATION IN THE GREAT DEPRESSION*

The article examines the proposition that preference shocks play a central role in our understanding of the Great Depression. I identify a series of unusually large negative shocks that destabilized the U.S. economy during the 1930s. When the artificial economy is paired with variable capital utilization and mildly increasing returns to scale in production, it is able to account for most of the decline in economic activity and it predicts a tepid recovery.     

Exchange rate volatility and capital inflows: role of financial development

There is vast literature examining the impact of exchange rate volatility on various macroeconomic aggregates such as economic growth, trade flows, domestic investment, and more recently capital flows. However, these studies have ignored the role of financial development while examining the impact of exchange rate volatility on capital flows. This study aims to analyze the impact of exchange rate volatility on capital inflows towards developing countries by incorporating the role of financial development over the time period 1980–2013. In this regard, the behavior of two types of capital flows is examined: physical capital inflows measured as foreign direct investment, and financial inflows quantified through remittance inflows. The empirical investigation comprises the direct as well as indirect effect of exchange rate volatility on capital inflows. The study employs dynamic system GMM estimation technique to empirically estimate the effect of exchange rate volatility on capital inflows. The empirical results of the study identify that exchange rate volatility dampens both physical and financial inflows towards developing countries. The indirect impact of exchange rate volatility through financial development, however, turns out positive and statistically significant. This finding reflects that financial development helps in reducing the harmful impact of exchange rate volatility on capital inflows. Hence, the study concludes that a developed financial system is an important channel through which developing countries may improve capital inflows in the long run.     

CEO社会资本对其薪酬水平和薪酬波动性的影响——公司市场价值波动性和股权集中度的调节作用

探讨了CEO的社会资本对自身薪酬水平和薪酬波动性的影响,以及公司市场价值波动性和股权集中度对这种影响关系的调节作用。利用2009—2015年德国DAX30指数企业的数据验证研究假设。结果显示:CEO的社会资本对其薪酬具有显著影响,即丰富的社会资本能够提高其薪酬水平,而且增大了薪酬波动性;上述两个正向影响受到公司市场价值波动性和公司股权集中度的调节作用,即公司市场价值波动性增强了CEO的社会资本对其薪酬波动性的影响,股权集中度则减弱了这种影响。     

International Capital Mobility in the Presence of Unemployment Insurance

The paper develops a general–equilibrium model with layoff unemployment to examine the effect of different unemployment insurance policies on international capital mobility. Conditions are derived under which capital will flow to the high–benefit country. Incentives for international capital movements are unaffected by how the burden of financing unemployment benefits is distributed between workers and firms. It is shown that capital outflows might have positive welfare effects for workers. This contrasts with results from standard models of international factor movements.     

MARKUPS AND THE REAL EFFECTS OF VOLATILITY SHOCKS

This article studies the role of endogenous markups in the transmission of volatility shocks in real models. I design a variant of a small open economy model with volatility shocks and firm dynamics that gives rise to endogenous markups. I calibrate this model to match the business cycle facts in emerging economies and show that the impact of volatility shocks is substantially amplified if markups are endogenously time varying. Volatility shocks increase savings, due to precautionary motives, and markups, which act as a wedge that endogenously decreases real wages and labor supply with further negative aggregate dynamics that are absent in the models with constant markups.     

INTEREST RATE VOLATILITY AND EXCHANGE RISK: NEW RULES FOR A COMMON MONETARY STANDARD

How does the choice of an exchange rate regime influence the volatility of interest rates? Are floating exchange rates useful “shock absorbers” that dampen fluctuations in domestic interest rates and prices or do they create additional risk that increases interest rate volatility and segments the international capital market? The answers are best seen in historical perspective.     

THE DETERMINANTS OF PRIVATE CAPITAL FLOWS IN EMERGING ECONOMIES: THE ROLE OF THE FED'S UNCONVENTIONAL MONETARY POLICY

Previous studies on the effect of the Fed's Unconventional Monetary Policy on capital flows in Emerging Economies have not been conclusive. I analyze if the effect of these policies on capital flows is heterogeneous between countries. This approach could be the smoking gun in this debate as I attempt to find evidence of a specific mechanism by which Unconventional Monetary Policy could affect the pattern of capital flows in Emerging Economies. The results suggest that Unconventional Monetary Policy has a significant effect on capital flows which depends on the type of measure adopted and the degree of financial exposure of each country to the United States. (JEL C23, E52, E58, F21, F32)     

ENVIRONMENTAL DYNAMICS AND THE LINKS BETWEEN GROWTH,VOLATILITY AND MORTALITY

I construct a model of a growing economy with pollution. The analysis of the model shows that the interactions between capital accumulation, endogenous lifetime and environmental quality determine both the long‐run growth rate and the pattern of convergence (i.e., monotonic or cyclical) towards the balanced growth path. I argue that such interactions can provide a possible explanatory factor behind the, empirically observed, negative correlation between growth and volatility. Furthermore, the model may capture the observed pattern whereby economic growth and mortality rates appear to be negatively related in the long run, but positively related in the short run.     

THE PECULIAR ECONOMICS OF HOUSING BUBBLES

Home values increase rapidly during housing bubbles generating large capital gains. High loan‐to‐value (LTV) mortgages secured by expected future home values are one way to take advantage of these capital gains. In this article, we use a simple partial equilibrium consumer theory model to explore the implications of high LTV borrowing. We find that sufficiently large expected house price growth leads to an upward‐sloping budget line when households can obtain high LTV mortgages. In this environment, the demand for housing fits neither the conventional theories of consumer goods nor that of investment goods. In fact, increases in the expected future price of housing may reduce current housing demand, whereas decreases in the effective (current) price may lead to households buying smaller homes. Moreover, high LTV loans reduce the effectiveness of monetary policy, but raise the volatility of aggregate demand. Tighter borrowing standards may help lower demand volatility at the expense of shrinking the economy. (JEL E21, R21, E52)     

CURRENCY SUBSTITUTION, U.S. MONEY DEMAND, AND INTERNATIONAL INTERDEPENDENCE

A number of writers have argued in recent years that massive international currency substitution has been a major cause of exchange rate volatility and monetary instability in the United States and other major countries. Such analysis is frequently coupled with recommendations for a return to pegged exchange rates. This paper critically examines the evidence presented for this currency substitution view. It argues that the weight of latest research suggests that direct international currency substitution has not been of major quantitative importance for the U.S. However, empirical evidence supports traditional views that international capital mobility can generate substantial short-run monetary interdependence even under flexible exchange rates. Thus, even though international currency substitution is of little importance to U.S. monetary conditions, a broader range of international considerations may be of considerable importance for the U.S. economy.