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on Open MacroEconomics |
| By: | Eiji Ogawa; Kentaro Iwatsubo |
| Abstract: | In this paper, we estimate structural VAR models with contemporaneous restrictions based on neo-classical and Keynesian theories to investigate whether the cause of current account surpluses for East Asian economies is a gsaving gluth or undervalued currencies. Analytical results show that the major determinant of the current account is the real effective exchange rate for all East Asian countries with the exception of China for which the major determinant is domestic GDP. Accordingly, the recently requested revaluation of the Chinese yuan may not be an effective policy for reducing the Chinese current account surplus, and may affect other Asian current accounts. We also investigate whether a Chinese currency revaluation would contribute to the improvement of current account imbalances in East Asia and find that a revaluation would improve the current accounts of Japan, Korea, Indonesia, and Thailand. Since the trade structures of major East Asian countries are substitutes with that of China, a Chinese currency revaluation might not lead to a decrease, rather that an increase, in East Asian current account surpluses. Coordination of currency policy among East Asian countries is, therefore, needed to solve the global current account imbalance. |
| Date: | 2009–03 |
| URL: | http://d.repec.org/n?u=RePEc:hst:ghsdps:gd08-048&r=opm |
| By: | Eiji Ogawa; Kentaro Iwatsubo |
| Abstract: | This paper is to investigate how much realignment of currencies is needed for adjustments to the current account imbalances of Japan compared with those of East Asia as a whole, given the productions networks in East Asia. The analyses show that the large realignments of the Japanese yen and other East Asian currencies would be needed if the adjustments are completed with only exchange rates. We also find that the degree of the exchange rate adjustments of East Asia as a whole is smaller than that of Japan only. Moreover, we investigate why the adjustment becomes more difficult if we rely only on the exchange rates in Japan. We find that Japanese outward FDI has increased independently with the exchange rate and that a ratio of income account to current account has increased due to the FDI. The findings imply that the Japanese economy has an increasing structural part of the Japanese current account which does not respond to the exchange rate movement. |
| Date: | 2009–03 |
| URL: | http://d.repec.org/n?u=RePEc:hst:ghsdps:gd08-050&r=opm |
| By: | Sebnem Kalemli-Ozcan; Elias Papaioannou; José Luis Peydró |
| Abstract: | Standard theory predicts that financial integration leads to a lower degree of business cycle synchronization. Surprisingly, cross-country studies find the opposite. Our contribution is to document the theoretically predicted negative effect of financial integration on business cycle synchronization as a robust regularity. We use a confidential dataset on banks' international bilateral exposure over the past three decades in a panel of twenty developed countries. The rich panel structure allows us to control for time-invariant country-pair factors and global trends that affect both financial integration and business cycle patterns. In contrast to previous empirical work we find that a higher degree of financial integration is associated with less synchronized output cycles. We also employ two distinct instrumental variable approaches to identify the one-way effect of integration on synchronization. These specifications reveal that the component of banking integration predicted by legislative-regulatory harmonization policies and the nature of the bilateral exchange rate regime has a negative effect on output synchronization. |
| JEL: | E32 F15 F36 G21 O16 |
| Date: | 2009–04 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:14887&r=opm |
| By: | Philippe Moutot; Giovanni Vitale |
| Abstract: | Since the mid-1980s the world economy has gone through profound transformations of which the sources and effects are probably not yet completely understood. The process of continuous integration in trade, production and financial markets across countries and economic regions--which is what is generally defined as "globalisation"--affects directly the conduct of monetary policy in a variety of respects. The aim of this paper is to present an overview of the structural implications of globalisation for the domestic economies of developed countries and to deduct from these implications lessons for the conduct of monetary policy, and in particular the assessment of risks to price stability. |
| Keywords: | Globalization ; Monetary policy ; Inflation (Finance) ; International finance ; International trade |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:fip:feddgw:29&r=opm |
| By: | Mohammadi, Hassan; Jahan-Parvar, Mohammad R. |
| Abstract: | The paper studies the long-run relation and short-run dynamics between real oil prices and real exchange rates in a sample of fourteen oil-exporting countries to examine the possibility of Dutch disease in these countries. The results, based on threshold and momentum-threshold autoregressive (TAR and M-TAR) tests of cointegration, are mixed. Support for Dutch disease is found in five countries. For these countries, we also find evidence of (a) long-run uni-directional causality from oil prices to exchange rates; (b) faster adjustments in exchange rates to positive deviations from the equilibrium; and (c) short-run unidirectional causality from oil prices to exchange rates in two countries, unidirectional causality from exchange rates to oil prices in one country, and bi-directional causality between oil prices and exchange rates in one country. |
| Keywords: | Asymmetry; Cointegration; Dutch Disease; Error Correction; Oil Prices; Real Exchange Rates; Threshold and Momentum Threshold Autoregressive Models |
| JEL: | F37 C32 C52 F47 F31 |
| Date: | 2009–02 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:14578&r=opm |