Real and financial shocks,exchange rate regimes and the probability of a currency crisis

We analyze the relationships among shocks, exchange rate regimes, and capital controls in relation to the probability of a currency crisis. Based on the theoretical model by Nakatani (2016, 2017a), we use panel data on 34 developing countries and apply a probit estimation. We find that both productivity shocks and risk premium shocks trigger currency crises, whereas productivity shocks are important for severe currency crises. We also find that the effects of these shocks on the probability of a crisis are larger for floating exchange rate regimes and that capital controls mitigate the effects of productivity shocks in pegged regimes.     

Global policy optimization and the exchange-rate regime

The international coordination of macroeconomic policies is apt to be imperfect. Therefore, exchange-rate regimes can be compared by asking whether they allow individual governments to achieve their national objectives without coordination. This question is pursued in a model containing two large industrial countries and many small less-developed countries. The model starts and ends in a stationary state, and governments are well behaved; they do not try to push their economies away from long-run equilibrium. But they have views about the appropriate path back to equilibrium following a shock and use their monetary policies to reach it. When both large countries do so independently, they can wind up in a less than optimal situation, and coordination is needed to extract them from it. The character of the outcome depends on both the nature of the shock and the exchange-rate regime. But pegged rates dominate floating rates in several cases, in that they obviate the need for coordination, and floating rates never dominate pegged rates. Thus, floating rates do not facilitate decentralized policy making but call for coordination more frequently than do pegged rates.     

Regime-specific impact of financial reforms on economic growth in Pakistan

This study uses and proposes a new methodological approach to construct a financial liberalization index on the basis of the dynamic factor model technique. The resulting index is used to investigate the impact of the financial sector reforms in Pakistan on economic growth. Using the Markov regime-switching model over the period 1972–2015, the empirical results showed that the examined relationship is nonlinear, nonmonotonic, state-dependent, and better described by the two-state Markov switching model characterized by the high growth regime and low growth regime. Despite the positive impact of financial liberalization on economic growth in both the high and low growth regimes, financial liberalization relatively strongly affects real GDP growth in the high growth regime. The results further demonstrate that transition probabilities establish an inordinate episode of the low growth regime. Furthermore, the high growth regime is relatively short-lived than the low growth regime. Among the other variables, trade openness and physical capital stock have a positive impact on economic growth, while labor force and government expenditure exert a negative effect on economic growth. Several economic policies are proposed and discussed for better functioning of financial sector development in Pakistan.     

Macroprudential policy and the probability of a banking crisis

The ultimate purpose of macroprudential policy is to avoid financial instability, such as banking crises, which have a long-lasting and devastating effect on the economy. Although a growing number of studies have examined the effects of macroprudential policy on credit growth, few empirical studies have analyzed its effect on the probability of a banking crisis. Does macroprudential policy actually affect the probability of a banking crisis? Do other macroeconomic policies matter for the effectiveness of macroprudential policy? To answer these questions, this paper empirically investigates the effect of macroprudential policy on the probability of a banking crisis and its relationship with other macroeconomic policies. Specifically, using data on 65 countries from 2000 to 2016, we employ a probit model to analyze the effect of changes in the loan-to-value (LTV) ratio on crisis probability. Our results show that macroprudential policy is effective in changing the probability of a banking crisis via a credit channel and that its effectiveness depends on other macroeconomic policies. Changes in the LTV ratio are found to be effective in influencing the probability of a banking crisis in countries that have inflation targeting frameworks, floating exchange rate regimes, and/or no capital controls. Our results underscore the importance of policy coordination among different government bodies to design an appropriate macroprudential policy, especially in the current context of the Covid-19 crisis.     

The trinity of wage setting in EMU: A policy proposal

Diverging labor cost developments are often considered to be one of the most important factors that led to large current account imbalances in the euro area (EA) in the run-up to the global financial crisis. It has also been shown that wage growth differentials have significantly lowered the co-movement of EA countries’ business cycles – the most widely used meta-criterion for optimum currency areas. Against this background, this paper develops a wage-setting benchmark that aims to keep the economy in internal equilibrium and to maintain price stability, while it also exhibits the capacity to correct for external imbalances. The proposed wage benchmark is very simple and may serve as an anchor for the macroeconomic dialogue in Economic and Monetary Union. In order to demonstrate the potentially beneficial effects of such a wage benchmark we present some simulations showing how current account balances and labor costs would have developed across EA countries if the rule had served as a benchmark already in the run up to the crisis.     

汇率制度退出与转型：文献综述

如何退出已有汇率制度安排，向更具弹性的汇率制度转型？这是当前新兴市场和发展中国家面临的一个重要问题。在维持已有制度的边际成本与边际收益一致时退出已有汇率制度是最优的。最佳退出时机的经验判断原则取决于该国的经济结构、经济发展阶段、经济冲击、政治与制度因素等。这些因素同时也决定了该国汇率制度退出和转型的策略选择。汇率制度转型所需的基本条件是：一个具有一定深度和一定流动性的外汇市场，一套连贯的中央银行外汇市场干预的政策措施，一个恰当的名义锚，监测和管理公共部门和私人部门外汇风险暴露的有效机制。     

我国资本项目开放的风险管理研究--进程安排与制度建设

开放资本项目是实现一国经济全球化、金融自由化的重要层面与表现.随着中国进一步的市场开放以及经济改革的深化,人民币资本项目也必然面临着一个减少管制、扩大开放的问题.但是,在不完全具备开放条件的情况下过早、过急地放开资本项目管制将会面临诸多风险.对于包括中国在内的正在从资本管制走向资本项目开放的发展中国家而言,当前急需解决的是如何能够使转变过程中的风险降到最低,从而最好地利用金融自由化所带来的收益.     

Macroeconomic imbalances in Europe: How to overcome the fallacy of unit labour costs

Policy recommendations based on unit labour costs (ULC) indices can lead to undesirable and counterproductive policies, because they do not reveal possible distortions in the base year. In this paper, we discuss the problems with the ULC-current account relation and provide an alternative measure for relative wage costs called Wage Competitive index (WCI) based on the assumption of convergence of the returns on capital. We show how to calculate it and that it is more efficient than traditional ULC and REER indicators. The implication is that policymakers should not focus on nominal wage setting only, but also more broadly on all factors which affect the return on capital. This implies that the well-known Rehn–Meidner rule, which underlies the Macroeconomic Dialogue should be modified.     

Currency boards,depoliticization and macroeconomic stability: the political economy of institutional complementarities*

This article analyzes the potential for institutional design to depoliticize macroeconomic policy-making by examining currency board arrangements. It develops a novel argument to understand the effects of institutional design based on institutional complementarities. This argument highlights that the functioning of a given institution is conditioned by the broader institutional context. The article contrasts this framework with two common approaches – here termed the institutional design and the epiphenomenalism views – and argues that the centrality of institutional complementarities can account for the mixed record of currency boards. The most important complementarities of a currency board are with fiscal, labor market and informal institutions, which are important prerequisites for successful currency boards. By drawing on recent advances in the study of depoliticization, we show how these institutions contribute to governmental, societal and discursive depoliticization. This argument is evaluated by examining three case studies of currency boards – Argentina, Estonia and Lithuania. The article also explores some broader implications of this analysis for understanding the depoliticization of economic policy.     

Models of supranational policymaking and the reform of the EMU

Under what conditions do sovereign governments agree to create a common policy institution? And what model of supranational policymaking may be preferable? To answer these questions, we introduce a policy game of two interdependent countries with reciprocal negative externalities created by shocks to a socially relevant variable. Depending on national preferences over policy options and their outcomes, both countries incur welfare losses if governments pursue non-cooperative policy choices. Then we examine what kind of supranational policy regimes may be endorsed by both governments according to the Pareto criterion. Two regimes are “technocratic” (they do not take national preferences into account), two are “political” (they do). One political regime that we call “union” aggregates the national preferences additively. The thrust of our analysis is that the technocratic regimes are dominated by non-cooperation, so that the single alternative is between the union and non-cooperation. Yet an important point is that the union is the Pareto-dominant regime only within a limited range of asymmetry between countries’ preferences. This result has notable implications for the debate on the reform of the European Economic and Monetary Union (EMU) facing the challenge of further integration of member countries. Application to the EMU case is assisted by numerical simulations based on empirical parameters drawn from qualified external sources, which show that aymmetries in national attitudes towards policies that “Europe wants” may jeopardize the creation of a union in alternative to non-cooperation.     

International transmission of monetary and global commodity price shocks to Turkey

This paper explores the international transmission mechanisms on the macroeconomic and monetary variables of Turkey and hence proposes some particular policy implications. The effects of monetary shocks stemming from the U.S. and the European area, and global commodity price shocks are investigated using a structural vector auto-regression (SVAR) approach. For the analysis, we use monthly data from 2002M01 to 2016M06 and we analyze the transmission mechanism in Turkey using two different SVAR model specifications. Our results reveal that shocks coming from the U.S. and the Euro area lead to significantly different responses on industrial production, consumer prices, real effective exchange rates, and the domestic interest rate, with the Euro area monetary expansion having more explicit and positive effects on the real economy. The global commodity price shocks affect the Turkish macroeconomic variables in a similar but much less powerful fashion than that of the U.S. monetary expansion. As our empirical findings point out that the Turkish economy is vulnerable to global monetary and commodity price shocks. This vulnerability necessitates moving to a sustainable growth path consistent with a sustainable current account balance and a sustainable private and government debt coupled with a strengthened macroprudential regime and comprehensive structural reforms.     

金融危机:不确定规则下的货币权力失控

金融危机不只是货币交易混乱的结果,更是货币规则紊乱的产物。因为现代货币的信用基础完全依赖于确定的货币规则。货币规则是发行者与持币者达成的社会契约,是发行者对持币人权利的确定承诺,是将持币者的财产权利置于宪政机制保护之下的一项制度安排。所以,无论是因配合财政扩张政策而滥发货币,还是因金融利益集团的操控而滥发货币,金融危机在本质上都是货币权力滥用或错用的结果,都是侵害持币人财产权的信用危机与法治危机。基于此,应对和防范金融危机就不能只限于加强对金融投机行为的监管,还需要通过确定的货币规则加强对货币权力的约束,从而使得现代金融所依赖的信用体系能够具备确定与可靠的制度基础。     

Fiscal rules in a volatile world: A welfare-based approach

It is widely agreed that a fiscal rule should boost discipline and credibility. A rule should also reduce macroeconomic volatility and be easily understood. Toward such ends, a government may run structural surpluses. In so doing, the government accumulates a precautionary cushion of assets on behalf of agents who do not enjoy access to capital markets. As an additional criterion, that level of assets should be bounded. We provide an example of a structural surplus rule that satisfies all such criteria. In our general equilibrium simulations, we show that such a rule benefits credit-constrained consumers but may hurt others.     

An analysis of the welfare implications of alternative exchange rate regimes: An intertemporal model with an application

This paper develops a methodology for evaluating the short-run welfare implications of different exchange rate regimes. Heterogeneous, optimizing domestic consumers live for two periods, consume goods and leisure, supply labor, save home and foreign bonds, and demand currency. Firms maximize profits. The home government levies taxes, issues money and bonds and supplies public goods. The foreign country demands imports, supplies exports, and lends to the home country. The theoretical model is estimated for Australia. Counter-factual simulations are carried out. The results suggest that floating was, or would have been, the superior regime for the 1981–1984 period.     

Macroeconomic impacts of Chinese currency appreciation on China and the Rest of World: A global CGE analysis

This paper analyzes the ex-ante short-term impacts of the Chinese RMB appreciation on the Chinese and world economy, using a novel approach of modeling nominal exchange rate adjustment in the GTAP, a global CGE model. Scenario results show that Chinese economy will be affected negatively, with lower real GDP, lower employment rates, and a decline in the trade surplus. Chinese currency appreciation has positive impact on the GDP of the major countries and regions, although by a small margin. With higher Chinese exchange rate, trade balance for other trading partner countries improves with the exception of the U.S.     

Rule of law and balance of power sustain US dollar preeminence

In the last few decades, and especially since the financial crisis of 2007–2008, uncertainty about the future of the US dollar has been mounting. A broad-based theoretical debate on the decline of the dollar and its consequences has begun. There is a large body of studies that sees the origin of an international money as a market-led process. In this view, because the United States will very soon lose its economic pre-eminence the US dollar will consequently share its international role with other currencies or even be replaced by the renminbi. In this paper we contest this argument, focusing on the conditions that make a fiat money acceptable in international transactions. Trust in a type of money like this needs an institutional framework that guarantees the property rights of currency holders. This framework implies a high level of rule of law domestically and a high level of state capability in the international balance of power. Since at present no other currency fulfils these two requirements at the same time, the dominance of the US dollar as an international money is going to last.     

How effective are countercyclical policy tools in mitigating the impact of financial and economic crises in Africa?

Using panel vector auto regression (PVAR) and GMM estimates we provide evidence for the transmission of financial crises to African economies through foreign direct investments and exports. Although many countries resort to stimulus packages to mitigate the impacts of financial crises, we find no evidence for fiscal policy to be considered an effective countercyclical policy tool in the African context. Monetary policy could be an effective tool in mitigating the impact in non-resource rich SSA countries, but not in others. Limited policy space calls for African economies to reconsider their policies towards trade, investment, finance and macroeconomic management.     

How does economic globalisation affect the welfare state? Focusing on the mediating effect of welfare regimes

In recent years the impact of globalisation on the welfare state has become a major issue in comparative policy studies. Some empirical studies demonstrate a negative relationship between globalisation and the welfare state, while others show adverse findings or a non-significant relationship. The impact of globalisation, however, can be neither uniform nor unidirectional because of the differences in the political economies of individual welfare states. Welfare regimes reflect qualitative differences in arrangements of welfare institutions and the associated enduring configuration of the welfare nexus, suggesting that welfare regimes may influence the impact of globalisation on the welfare state. We scrutinise the relationship between globalisation and the welfare state by sampling 18 affluent countries from 1980 to 2001 and concentrating on the mediating effect of three welfare regime types. Our study provides a comprehensive examination of the relationship between globalisation and the welfare state using a state-of-the-art analytical technique – the mixed-effect model. Findings suggest that welfare regimes respond differently to the impact of globalisation and therefore mediate the relationship between globalisation and the welfare state. Globalisation negatively affects the welfare state in a social democratic regime, while it marginally affects the welfare state in liberal and conservative regimes.     

投资、消费与经济增长

刺激消费不能作为当前宏观政策实施的重点 ,因为投资特别是非国有投资不足才是当前我国经济面临的主要矛盾。非国有经济投资不足的原因在于融资的交易成本太高 ,致使投资意愿得不到相应的资金支持而难以实现。有效解决民营经济的融资难问题 ,实现投资增长和消费回升 ,根本出路在于通过深化金融体制改革 ,进一步完善货币政策传导的微观基础和相应的实施条件。     

Hungary in transition: a computable general equilibrium model comparison with Austria

We approach the problem of Hungary's transformation from a partially centrally planned to a market-oriented economy with a cross-country comparison using two computable general equilibrium (CGE) models of Hungary, 1977 and 1986, and one of Austria, 1976. These three models represent a continuum of small open economies and allow a “quasidynamic” analysis using static CGE models. We examine two types of transformation issues: external (trade liberalization, import price reductions, and redirection of foreign trade; “Dutch Disease reversal”) and internal (decreases in subsidy levels). Overall, it is clear that with Hungary's borrowing constraints, liberalization should not be pursued in isolation; a change in the tax structure is necessary at the same time. The results for Austria indicate that liberalization brings smaller welfare improvements accompanied by smaller increases in the current account and government deficits.