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on Open MacroEconomics |
| By: | David Berger; Jon Faust; John H. Rogers; Kai Steverson |
| Abstract: | We analyze retail prices and at-the-dock (import) prices of specific items in the Bureau of Labor Statistics' (BLS) CPI and IPP databases, using both databases simultaneously to identify items that are identical in description at the dock and when sold at retail. This identification allows us to measure the distribution wedge associated with bringing traded goods from the point of entry into the United States to their retail outlet. We find that overall U.S. distribution wedges are 50-70%, around 10 to 20 percentage points higher than that reported in the literature. We discuss the implications of this for measuring the size of the "pure" tradeables sector, exchange rate pass-through, and real exchange rate determination. We find that distribution wedges are very stable over time but there is considerable variation across items. There is some variation across the country of origin for the imported item, for our major trading partners, but not as much as the cross-item variation. We also investigate the determinants of distribution wedges, finding that wedges do not vary systematically with exchange rates, but are related to other features of the micro data. |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgif:972&r=opm |
| By: | Guonan Ma; Zhou Haiwen |
| Abstract: | China’s emergence as a major player in world trade is well known, but its rising role in global finance is perhaps underappreciated. China is the second largest creditor in the world today, with a net creditor position of exceeding 30% of GDP in 2007. In this paper, we test the importance of growth differential, demographics, government debt, financial depth and the exchange rate in shaping China’s net foreign asset position. Our findings highlight the sharp fall in youth dependency as one key driver behind China’s puzzlingly large net lender position and also confirm the neoclassical prediction that faster growth attracts more capital inflows. Looking ahead, our findings also suggest that China is unlikely to turn into a meaningful net debtor nation over the next two decades. Moreover, we project that, as China engages in increased cross-border asset trade, its gross foreign assets and liabilities could triple in 10 years. While adjustments in China’s net foreign asset position are expected to be gradual and may thus facilitate its capital account opening, increasing exposure to external shocks and growing interactions with the rest of the world may present challenges both to China and to the global financial system. |
| Keywords: | international investment position, external balance sheet, current account balance, financial integration |
| Date: | 2009–07 |
| URL: | http://d.repec.org/n?u=RePEc:bis:biswps:286&r=opm |
| By: | Tuck Cheong Tang; Dietrich Fausten |
| Abstract: | This study uses two alternative specifications to test the interdependence between the current and capital accounts of the balance of payments. The empirical specifications, derived from the balance of payments constraint and from national income accounting relationships, respectively, yield consistent support for the interdependence hypothesis. The balance of payments specification returns positive findings for nine of the ten sample countries. These are corroborated by the general equilibrium specification in three instances. Neglect of the comprehensive lag structure of the underlying model may account for the relatively weak support from the general equilibrium specification of the interdependence hypothesis. |
| Keywords: | Current account; Capital account; Developing countries; G-5; Interdependence |
| JEL: | F32 |
| Date: | 2009–06 |
| URL: | http://d.repec.org/n?u=RePEc:mos:moswps:2008-04&r=opm |
| By: | Heng Chen; Dietrich K. Fausten; Wing-Keung Wong |
| Abstract: | One possible consequence of the establishment of the Euro is a challenge to the hegemony of the US dollar as the predominant international currency. No other currency has been able to rival the international role of the national currency of the US since World War II. The fact that the unipolar international monetary system can be unstable in the presence of large shocks opens a window of opportunity for the Euro to promote systemic stability. The present study pursues this conjecture by, first, exploring with cointegration and ECM techniques the interdependence between the dynamics of the Dollar/Euro exchange rate and economic fundamentals in the context of a monetary exchange rate model. Identification of the key determinants of the value of the Euro informs our analysis of the policy stance of the European Central Bank regarding the long-run global role of the Euro. Secondly, we explore whether the opportunity for a prominent systemic role of the Euro has been realized by examining the impact of the Euro on the global financial market. |
| Keywords: | Euro, Exchange rate, Monetary model, Cointegration |
| JEL: | F15 G14 P34 |
| Date: | 2009–06 |
| URL: | http://d.repec.org/n?u=RePEc:mos:moswps:2006-14&r=opm |