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on Open MacroEconomics |
| By: | Scott Andrew Urban (St Antony’s College, Oxford University, Oxford OX2 6JF) |
| Abstract: | There is an implicit consensus that 1930s exchange-rate regimes can be characterised as some variant of ‘floating’. This paper applies an adaptation of modern methodologies of exchange-rate regime classification to a panel of 47 countries in weekly observations between January 1919 and August 1939. On the basis of modern benchmarks, the 1930s world monetary system would not be considered ‘floating’ or even ‘managed floating’. One implication is that today’s fiat-based, managed-floating international financial architecture is unprecedented. |
| Keywords: | Fixed Exchange Rate, International Reserves, Intervention |
| JEL: | F31 F33 N10 |
| Date: | 2009–04–01 |
| URL: | http://d.repec.org/n?u=RePEc:nuf:esohwp:_076&r=opm |
| By: | Laura Povoledo (UWE, Bristol) |
| Abstract: | This paper investigates the business cycle fluctuations of the tradeable and nontradeable sectors of the US economy. Then, it evaluates whether a “New Open Economy” model having prices sticky in the producer’s currency can reproduce the observed fluctuations qualitatively. The answer is positive: both in the model and in the data the standard deviations of tradeable inflation, output and employment are significantly higher than the standard deviations of the corresponding nontradeable sector variables. A key role in generating this result is played by the greater responsiveness of tradeable sector variables to monetary shocks. |
| Keywords: | New Open Economy Macroeconomics; Tradeable and Nontradeable Sectors;Business Cycles. |
| JEL: | F41 E32 |
| Date: | 2009–04 |
| URL: | http://d.repec.org/n?u=RePEc:uwe:wpaper:0906&r=opm |
| By: | Masao Ogaki (Department of Economics, Ohio State University); Hyeongwoo Kim (Department of Economics, Auburn University) |
| Abstract: | In the Kehoe and Midrigan (2007) model, the persistence parameter of the real exchange rate is closely related to the measure of price stickiness in the Calvo-pricing model. When we employ this view, Rogo's (1996) 3 to 5 year consensus half-life implies that rms update their prices every 18 to 30 quarters on average. This is at odds with most estimates from U.S. aggregate data when single equation methods are applied to the New Keynesian Phillips Curve (NKPC), or when system methods are applied to Dynamic Stochastic General Equilibrium (DSGE) models that include the NKPC. It is well known, however, that there is a large degree of uncertainty around the consensus half-life of the real exchange rate. To obtain a more efficient estimator, this paper develops a system method that combines the Taylor rule and a standard exchange rate model to estimate half-lives. We use a median unbiased estimator for the system method with nonparametric bootstrap confidence intervals, and compare the results with those from the single equation method typically used in the literature. Applying the method to the real exchange rates of 18 developed countries against the U.S. dollar, we nd that most of the half-life estimates from the single equation method fall in the range of 3 to 5 years with wide confidence intervals that extend to positive infinity. In contrast, the system method yields median-unbiased estimates that are typically shorter than one year with much sharper 95% confidence intervals, most of which range from 3 quarters to 5 years. These median unbiased estimates and the lower bound of the confidence intervals for the half-lives of real exchange rates are consistent with most estimates of price stickiness using aggregate U.S. data for the NKPC and DSGE models. |
| Keywords: | Purchasing Power Parity, Calvo Pricing, Taylor Rule, Half-Life of PPP Deviations, Median Unbiased Estimator, Grid-t Confidence Interval |
| JEL: | J31 J24 O15 |
| Date: | 2009–04 |
| URL: | http://d.repec.org/n?u=RePEc:osu:osuewp:09-03&r=opm |
| By: | Juan Carlos Gozzi; Ross Levine; Sergio L. Schmukler |
| Abstract: | This paper documents several new patterns associated with firms issuing stocks and bonds in foreign markets that motivate the need for and help guide the direction of future research. Three major patterns stand out. (1) A large and growing fraction of capital raisings, especially debt issuances, occurs in international markets, but a very small number of firms accounts for the bulk of international capital raisings, highlighting the cross-firm heterogeneity in financial globalization. (2) Changes in firm performance following equity and debt issuances in international markets are qualitatively similar to those following domestic issuances, suggesting that capital raisings abroad are not intrinsically different from those in domestic markets. (3) Firms continue to issue securities both abroad and at home after accessing international markets, suggesting that international and domestic markets are complements, not substitutes. Existing theories do not fully account for these patterns. |
| JEL: | F20 F36 G15 |
| Date: | 2009–05 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:14961&r=opm |
| By: | Kose, M. Ayhan (International Monetary Fund); Prasad, Eswar (Cornell University); Taylor, Ashley D. (London School of Economics) |
| Abstract: | The financial crisis has re-ignited the fierce debate about the merits of financial globalization and its implications for growth, especially for developing countries. The empirical literature has not been able to conclusively establish the presumed growth benefits of financial integration. Indeed, a new literature proposes that the indirect benefits of financial integration may be more important than the traditional financing channel emphasized in previous analyses. A major complication, however, is that there seem to be certain "threshold" levels of financial and institutional development that an economy needs to attain before it can derive the indirect benefits and reduce the risks of financial openness. In this paper, we develop a unified empirical framework for characterizing such threshold conditions. We find that there are clearly identifiable thresholds in variables such as financial depth and institutional quality − the cost-benefit trade-off from financial openness improves significantly once these threshold conditions are satisfied. We also find that the thresholds are lower for foreign direct investment and portfolio equity liabilities compared to those for debt liabilities. |
| Keywords: | financial openness, capital account liberalization, growth, threshold conditions, financial development, institutions, macroeconomic policies |
| JEL: | F3 F4 O4 |
| Date: | 2009–04 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp4133&r=opm |
| By: | Toshitaka Sekine |
| Abstract: | This paper highlights relative price adjustments taking place in the global economy as important sources of the lower levels of inflation rates observed in the recent decades. Using a markup model, it shows substantial effects from declines in wage costs and import prices relative to consumer prices. Out of the 5 percentage point decline in the inflation rates in eight OECD countries from 1970-1989 to 1990-2006, global shocks to two relative prices account for more than 1.5 percentage points, while a monetary policy shock accounts for another 1 percentage point. |
| Keywords: | markup model, open-economy New Keynesian Phillips curve, dynamic factor model, global disinflation |
| Date: | 2009–05 |
| URL: | http://d.repec.org/n?u=RePEc:bis:biswps:283&r=opm |
| By: | Danny Cassimon (University of Antwerp); Bjorn Van Campenhout (University of Antwerp) |
| Abstract: | It is often argued that financial globalization involves threshold effects - countries should have a minimum level of preconditions in place before they can reap the benets of financial integration. We investigate what this means for the dynamics of de facto financial globalization, using recently developed threshold and sample splitting methods. We find that there are indeed signs of multiple equilibria in the dynamics of financial integration. We confirm that the main cause for these non-linearities is the quality of the institutional context, as measured by corruption, investment profile, capital account balance and aggregate growth prospects. |
| Keywords: | financial globalization, multiple equilibria, threshold conditions,institutions |
| Date: | 2008–09 |
| URL: | http://d.repec.org/n?u=RePEc:wef:wpaper:0044&r=opm |