Introduction to the Special Issue on “Exchange Rates,Financial Integration and Uncertainty”

Open Economies Review -     

Exchange Rates and the Trade Balance for Dynamic Asian Economies—Does the J-Curve Exist for Singapore,Malaysia, and Korea?

The purpose of this article is to examine the relationship between the real trade balance and the real exchange rate for bilateral trade in merchandise goods between Singapore, Korea, and Malaysia and the USA and Japan on a quarterly basis over the period 1970 to 1996 using the partial reduced form model of Rose and Yellen (1989) derived from the two-country imperfect substitutes model. With the exception of Korean trade with the USA, and in line with recent work using a similar methodology, our findings suggest that the real exchange rate does not have a significant impact on the real trade balance, and for Singapore and Malaysia we can find no persuasive evidence for J-curves. For Korea, however, the data were consistent with some J-curve effects with respect to both Japan and the USA. Moreover, it is possible that for Korea these effects were being masked or muted by small country pricing of exports in foreign currency, but there was no evidence that imports subsequently fell as the lag length on the real exchange rate increased, which would be required to support a strict interpretation of the J-curve.     

Japan's Policy Stance on East Asian Neo-Regionalism: From Being a “Reluctant”, to Becoming a “Proactive” State

Abstract

This article is a theoretically grounded empirical contribution aimed at shedding light on Japan's policy stance on East Asian neo-regionalism. It aims to examine the recent region-building process in East Asia. The dynamics in East Asia suggest that regional institutionalization, brought about by norm diffusion based on the idea of neo-regionalism, is likely to follow a progressive and evolutionary trajectory through the institutionalization of the Association of Southeast Asian Nation (ASEAN)?+?3 (South Korea, Japan and China). It provides a wide spectrum of regional-integrationist perspectives in order to offer as full a picture as possible of Japan's role in promoting regional integration in East Asia. The key finding of this article is that Japan has changed from a being “reluctant”, to becoming a “proactive” state in the context of regional collaboration in East Asia.     

Empirical Study on New Issue Long-term Pricing Performance ——Subject to the Hypothesis and Proof of Shell Resource Value

This paper calculates the long-term return of the IPOs in China＇s stock market, we find that the positive abnormal return of new issues lasts for 7 months after adjusted by the market return. The author explains the long-term market performance of IPOs with the concept of ＂Shell Resource＂ and supplies the related proofs.     

Monetary Policy in Austria–Hungary, 1876–1913: An Econometric Analysis of the Determinants of the Central Bank’s Discount Rate and the Liquidity Ratio

This paper presents a model to explain the official discount rate of the Central Bank of Austria–Hungary from 1876 to 1913. The discount rate is assumed to depend on the liquidity ratio of the Bank, defined as the ratio of its stock of metals to banknotes issued, and on changes in foreign discount rates. The paper also presents an equation explaining the liquidity ratio. We use “not equally spaced chronologically ordered data” referring to the 50 discount rate changes enacted. The regressions confirm that the liquidity ratio was the main determinant of the discount rate and that Germany (and not Great Britain) played a significant role in determining the Austro–Hungarian discount rate and the liquidity ratios, supporting the view that the classical gold standard was a decentralized multipolar system rather than a system fully dominated by London as suggested by Keynes. The regressions also suggest that, although Austria–Hungary had an inconvertible paper currency (1879–1892) and fluctuating exchange rates (1876–1895) and formally joined the gold standard only in 1902, it “shadowed” the behaviour of gold standard Central Banks with such consistency that the stability of the estimated regressions was relatively unaffected by the frequent institutional changes.

“Set a Sufficiently Ambitious Budget Target and Let the Automatic Stabilizers Work”. Will it Really Work in the European Monetary Union?

We examine the popular recipe in the title by means of an AD-LM-AS two-country model of the EMU, controlling for asymmetry in demand and supply shocks and in the monetary-policy transmission mechanism. Unless structural symmetry holds and symmetric shock occurs, national automatic stabilizers, even though supplemented with the common monetary policy, cannot deliver optimal stabilization in each economy. Inflation and output gaps are not closed and may be divergent in sign. Considering that a federal system of inter-regional insurance is lacking, the recipe under examination is too optimistic, while serious threat to EMU cohesion may arise. The econometric estimates we present show that existing national fiscal systems work very poorly as for the minimization, after shocks, of the dispersion of national incomes around the EMU average.     

Belgium relief fund,post war food shortages and the “True” cost of living

A key criteria in measuring the true cost of living is the absence of non-price rationing. To examine how non-price rationing distorts conventional measures of the cost of living, we examine the case of Belgium following WWI. The economic fallout from WWI to Belgium was so severe that the Commission for Relief in Belgium provided considerable assistance after the war ended. Nonetheless, food shortages persisted even after international assistance ceased in 1919 and production in Belgium did not return to pre-war levels until the end of 1924. A nonparametric revealed preference test for fifteen food categories shows shortages for eggs, butter, potatoes, vegetables, and sugar for periods from 1920 to 1924. Estimated virtual prices for these five foods, in conjunction with actual prices for the other ten goods, show that the actual cost of living was severely underestimated. The virtual prices of these five goods are the prices at which consumers would have willingly paid to purchase them, given the observed quantities, along with their other purchases. In this respect they can be viewed as market clearing prices. Our findings reinforce the view that Belgium's population continued to endure the effects of constrained consumption and a lower standard of living after the war ended. Further the results show how much the welfare of the Belgium people improved when shortages began to decrease.