Jerome L. Stein
- Published in print:
- 1998
- Published Online:
- November 2003
- ISBN:
- 9780198293064
- eISBN:
- 9780191596940
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/0198293062.003.0006
- Subject:
- Economics and Finance, Macro- and Monetary Economics, International
The longer‐term systematic determinants of the real effective exchange rate of Germany are both domestic and external. The main domestic determinants are time preference, the ratio of public plus ...
More
The longer‐term systematic determinants of the real effective exchange rate of Germany are both domestic and external. The main domestic determinants are time preference, the ratio of public plus private consumption/GNP, and the Tobin q‐ratio. The main external determinants are the European terms of trade, whose variations are produced primarily by relative price of imported materials, and the GDP in the G7. The NATREX model explains how these fundamental determinants determine the evolution of the German equilibrium real effective exchange rate and the current account/GNP in the medium to longer run. The PPP theory is a special case of the NATREX when a linear combination of the fundamentals is stationary.Less
The longer‐term systematic determinants of the real effective exchange rate of Germany are both domestic and external. The main domestic determinants are time preference, the ratio of public plus private consumption/GNP, and the Tobin q‐ratio. The main external determinants are the European terms of trade, whose variations are produced primarily by relative price of imported materials, and the GDP in the G7. The NATREX model explains how these fundamental determinants determine the evolution of the German equilibrium real effective exchange rate and the current account/GNP in the medium to longer run. The PPP theory is a special case of the NATREX when a linear combination of the fundamentals is stationary.
Marc Flandreau
- Published in print:
- 2004
- Published Online:
- August 2004
- ISBN:
- 9780199257867
- eISBN:
- 9780191601279
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/0199257868.003.0004
- Subject:
- Economics and Finance, Economic History
Chapter 3 provides an analysis of international arbitrage focusing on the exchange market between Paris and London. Resting on a new methodology to study exchange rate relations, this chapter shows ...
More
Chapter 3 provides an analysis of international arbitrage focusing on the exchange market between Paris and London. Resting on a new methodology to study exchange rate relations, this chapter shows that exchange rates between gold and bimetallic nations were heavily influenced by bullion discoveries.Less
Chapter 3 provides an analysis of international arbitrage focusing on the exchange market between Paris and London. Resting on a new methodology to study exchange rate relations, this chapter shows that exchange rates between gold and bimetallic nations were heavily influenced by bullion discoveries.
Kenneth Dyson and Kevin Featherstone
- Published in print:
- 1999
- Published Online:
- November 2003
- ISBN:
- 9780198296386
- eISBN:
- 9780191599125
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/019829638X.003.0014
- Subject:
- Political Science, European Union
Few issues have caused as much domestic turbulence for so long in recent decades as those associated with Britain's role in the European integration process. EMU challenged traditional concerns of ...
More
Few issues have caused as much domestic turbulence for so long in recent decades as those associated with Britain's role in the European integration process. EMU challenged traditional concerns of British policy on Europe: nationhood, sovereignty, and gradualism. It also conflicted with core Thatcherite policy beliefs about the sensitivity of monetary policy to market conditions. EMU appeared on the agenda as the Conservative Government wrestled with the question of ERM entry, and a cleavage appeared between ‘Europhiles’ and ‘Eurosceptics’. Mrs Thatcher was intent on asserting a more strident leadership on ‘Europe’, whilst her Chancellor was acting as a policy entrepreneur. Her government was thus ill‐prepared strategically for the EMU negotiations. After the surprise of the Delors Committee outcome, the Whitehall machine established tight policy coordination. Given the political context, however, it remained vulnerable to a narrowness of vision.Less
Few issues have caused as much domestic turbulence for so long in recent decades as those associated with Britain's role in the European integration process. EMU challenged traditional concerns of British policy on Europe: nationhood, sovereignty, and gradualism. It also conflicted with core Thatcherite policy beliefs about the sensitivity of monetary policy to market conditions. EMU appeared on the agenda as the Conservative Government wrestled with the question of ERM entry, and a cleavage appeared between ‘Europhiles’ and ‘Eurosceptics’. Mrs Thatcher was intent on asserting a more strident leadership on ‘Europe’, whilst her Chancellor was acting as a policy entrepreneur. Her government was thus ill‐prepared strategically for the EMU negotiations. After the surprise of the Delors Committee outcome, the Whitehall machine established tight policy coordination. Given the political context, however, it remained vulnerable to a narrowness of vision.
Jorge Braga De Macedo
- Published in print:
- 2001
- Published Online:
- October 2011
- ISBN:
- 9780198296867
- eISBN:
- 9780191685286
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780198296867.003.0011
- Subject:
- Economics and Finance, Development, Growth, and Environmental, Macro- and Monetary Economics
The national economy of Portugal was exposed to financial and political crises that proved to be recurrent, and an inflationary environment when Portugal became a member of the European Community in ...
More
The national economy of Portugal was exposed to financial and political crises that proved to be recurrent, and an inflationary environment when Portugal became a member of the European Community in 1985. When Cavaco Silva became prime minister, he was able to secure a huge part of parliament in the general elections that occurred in 1987 and 1991. A multi-annual fiscal adjustment strategy (MAFAS) was employed since his government implemented certain reforms. While this measure could be associated with the ECU, the financial and political stability brought on by such measures continued through the efforts of the socialist party which articulated a commitment towards the Economic and Monetary Union (EMU). The escudo exchange rates and interest rates reflected the sustained convergence that was expected through the 1992 Treaty on European Union. This chapter looks into how multilateral measures for surveillance imposed by the ‘code of conduct’ of the Exchange Rate Mechanism of the European Monetary System (ERM) improved national credibility.Less
The national economy of Portugal was exposed to financial and political crises that proved to be recurrent, and an inflationary environment when Portugal became a member of the European Community in 1985. When Cavaco Silva became prime minister, he was able to secure a huge part of parliament in the general elections that occurred in 1987 and 1991. A multi-annual fiscal adjustment strategy (MAFAS) was employed since his government implemented certain reforms. While this measure could be associated with the ECU, the financial and political stability brought on by such measures continued through the efforts of the socialist party which articulated a commitment towards the Economic and Monetary Union (EMU). The escudo exchange rates and interest rates reflected the sustained convergence that was expected through the 1992 Treaty on European Union. This chapter looks into how multilateral measures for surveillance imposed by the ‘code of conduct’ of the Exchange Rate Mechanism of the European Monetary System (ERM) improved national credibility.
Michael W. Klein and Jay C. Shambaugh
- Published in print:
- 2009
- Published Online:
- August 2013
- ISBN:
- 9780262013659
- eISBN:
- 9780262259002
- Item type:
- chapter
- Publisher:
- The MIT Press
- DOI:
- 10.7551/mitpress/9780262013659.003.0004
- Subject:
- Economics and Finance, Econometrics
This chapter analyzes the concept of “fixer” and “floater” in classifying countries during the gold standard period. These terms, though archaic, have not ceased to be relevant, and are seen still to ...
More
This chapter analyzes the concept of “fixer” and “floater” in classifying countries during the gold standard period. These terms, though archaic, have not ceased to be relevant, and are seen still to draw similar patterns in a small number of countries. The chapter mentions the research of Obstfeld and Rogoff, “The Mirage of Fixed Exchange Rates”, and cites the existence of a significant number of stable, meaningful exchange rate regimes that go against recent research. The chapter delves deeper into the history of fixed, floating and flipping exchange rate regimes in relation to the number of exchange rate spells and questions how these spells have survived, as well as how the reformation of pegs affect stability.Less
This chapter analyzes the concept of “fixer” and “floater” in classifying countries during the gold standard period. These terms, though archaic, have not ceased to be relevant, and are seen still to draw similar patterns in a small number of countries. The chapter mentions the research of Obstfeld and Rogoff, “The Mirage of Fixed Exchange Rates”, and cites the existence of a significant number of stable, meaningful exchange rate regimes that go against recent research. The chapter delves deeper into the history of fixed, floating and flipping exchange rate regimes in relation to the number of exchange rate spells and questions how these spells have survived, as well as how the reformation of pegs affect stability.
Harold L. Cole
- Published in print:
- 2019
- Published Online:
- May 2019
- ISBN:
- 9780190941697
- eISBN:
- 9780190949068
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/oso/9780190941697.003.0010
- Subject:
- Economics and Finance, Macro- and Monetary Economics, Financial Economics
This chapter discusses exchanges and the different types of exchange rate regimes. It describes how exchange rates impact on real exchange rates, and how movements in the real exchange rate are ...
More
This chapter discusses exchanges and the different types of exchange rate regimes. It describes how exchange rates impact on real exchange rates, and how movements in the real exchange rate are associated with boom-bust cycles. It also discusses interest parity.Less
This chapter discusses exchanges and the different types of exchange rate regimes. It describes how exchange rates impact on real exchange rates, and how movements in the real exchange rate are associated with boom-bust cycles. It also discusses interest parity.
Jacob Braude, Zvi Eckstein, Stanley Fischer, and Karnit Flug (eds)
- Published in print:
- 2013
- Published Online:
- January 2015
- ISBN:
- 9780262018340
- eISBN:
- 9780262305921
- Item type:
- book
- Publisher:
- The MIT Press
- DOI:
- 10.7551/mitpress/9780262018340.001.0001
- Subject:
- Economics and Finance, Financial Economics
The Great Recession shook not only the global economy and the financial systems of major economies, but also conventional wisdom of economic policy making, regulation of financial markets, and more. ...
More
The Great Recession shook not only the global economy and the financial systems of major economies, but also conventional wisdom of economic policy making, regulation of financial markets, and more. Following the collapse of Lehman Brothers in September 2008, governments and central banks acted on an unprecedented scope and scale. The policy response was unique in the variety of the measures taken, including some that had so far been almost unthinkable. Examples include unconventional monetary policy, interventions in financial markets, exchange rate intervention, and a renewed debate on capital controls. Preventive policies for reducing the risk of a crisis were also reconsidered, notably macroprudential policies, and stronger regulation of financial markets and institutions. The volume is policy oriented and presents the experience of various countries − advanced economies and emerging ones, countries that were hard-hit by the crisis and countries that weathered it successfully. The focus on central banks reflects the important role they played during the crisis, and the role that they might play in preventing or preparing for future crises. The chapters cover primarily monetary policy, macroprudential policy, and issues of exchange rates, capital flows, banking and financial markets as these relate to the crisis and its lessons. They also highlight the interactions among these dimensions, as the need for integration among policy areas is one of the important lessons of the crisis. This calls for closer cooperation and coordination between the various policy makers and regulators.Less
The Great Recession shook not only the global economy and the financial systems of major economies, but also conventional wisdom of economic policy making, regulation of financial markets, and more. Following the collapse of Lehman Brothers in September 2008, governments and central banks acted on an unprecedented scope and scale. The policy response was unique in the variety of the measures taken, including some that had so far been almost unthinkable. Examples include unconventional monetary policy, interventions in financial markets, exchange rate intervention, and a renewed debate on capital controls. Preventive policies for reducing the risk of a crisis were also reconsidered, notably macroprudential policies, and stronger regulation of financial markets and institutions. The volume is policy oriented and presents the experience of various countries − advanced economies and emerging ones, countries that were hard-hit by the crisis and countries that weathered it successfully. The focus on central banks reflects the important role they played during the crisis, and the role that they might play in preventing or preparing for future crises. The chapters cover primarily monetary policy, macroprudential policy, and issues of exchange rates, capital flows, banking and financial markets as these relate to the crisis and its lessons. They also highlight the interactions among these dimensions, as the need for integration among policy areas is one of the important lessons of the crisis. This calls for closer cooperation and coordination between the various policy makers and regulators.
Kevin P. Gallagher
- Published in print:
- 2014
- Published Online:
- August 2016
- ISBN:
- 9780801453113
- eISBN:
- 9780801454615
- Item type:
- chapter
- Publisher:
- Cornell University Press
- DOI:
- 10.7591/cornell/9780801453113.003.0004
- Subject:
- Political Science, Political Economy
This chapter examines the condition of emerging-market and developing countries (EMD) in the midst of global financial crisis. EMDs experienced a surge in cross-border financial inflows, which ...
More
This chapter examines the condition of emerging-market and developing countries (EMD) in the midst of global financial crisis. EMDs experienced a surge in cross-border financial inflows, which suddenly ceased in 2008 after the collapse of Lehman Brothers. Capital flows were V-shaped, however, with the developing world experiencing a surge in financial flows once again in the wake of the crisis. Exchange rates appreciated, and many nations also feared subsequent asset bubbles. Much of the surge was a function of low interest rates and slower growth in the industrialized world and of faster growth and higher interest rates in key EMDs.Less
This chapter examines the condition of emerging-market and developing countries (EMD) in the midst of global financial crisis. EMDs experienced a surge in cross-border financial inflows, which suddenly ceased in 2008 after the collapse of Lehman Brothers. Capital flows were V-shaped, however, with the developing world experiencing a surge in financial flows once again in the wake of the crisis. Exchange rates appreciated, and many nations also feared subsequent asset bubbles. Much of the surge was a function of low interest rates and slower growth in the industrialized world and of faster growth and higher interest rates in key EMDs.
Yin-Wong Cheung and Frank Westermann (eds)
- Published in print:
- 2013
- Published Online:
- May 2014
- ISBN:
- 9780262019804
- eISBN:
- 9780262314442
- Item type:
- book
- Publisher:
- The MIT Press
- DOI:
- 10.7551/mitpress/9780262019804.001.0001
- Subject:
- Economics and Finance, Macro- and Monetary Economics
One lens through which to view global economic interdependence and the spillover of shocks is that of decoupling (and then recoupling). Decoupling between developed and developing countries can be ...
More
One lens through which to view global economic interdependence and the spillover of shocks is that of decoupling (and then recoupling). Decoupling between developed and developing countries can be seen in the strong economic performance of China and India relative to that of the United States and Europe in the early 2000s. Recoupling then took place as developing countries sank along with the developed world during the deepening financial crisis of 2008. This volume examines patterns of global economic interdependence and the propagation of shocks in an increasingly integrated world economy. The contributors discuss such topics as the transmission of exogenous shocks; causes of business cycle synchronicity; the differences between global and regional shocks; the South-South trade relationship and its effect on decoupling; vertical specialization and Mexico’s manufacturing exports; growth prospects in China, the United States, and Europe after the financial crisis; and the evolving role of the U.S. dollar in international monetary architecture.Less
One lens through which to view global economic interdependence and the spillover of shocks is that of decoupling (and then recoupling). Decoupling between developed and developing countries can be seen in the strong economic performance of China and India relative to that of the United States and Europe in the early 2000s. Recoupling then took place as developing countries sank along with the developed world during the deepening financial crisis of 2008. This volume examines patterns of global economic interdependence and the propagation of shocks in an increasingly integrated world economy. The contributors discuss such topics as the transmission of exogenous shocks; causes of business cycle synchronicity; the differences between global and regional shocks; the South-South trade relationship and its effect on decoupling; vertical specialization and Mexico’s manufacturing exports; growth prospects in China, the United States, and Europe after the financial crisis; and the evolving role of the U.S. dollar in international monetary architecture.
Jonathan D. Ostry
- Published in print:
- 2013
- Published Online:
- January 2015
- ISBN:
- 9780262018340
- eISBN:
- 9780262305921
- Item type:
- chapter
- Publisher:
- The MIT Press
- DOI:
- 10.7551/mitpress/9780262018340.003.0007
- Subject:
- Economics and Finance, Financial Economics
This chapter reviews some arguments on the appropriate management of capital inflow surges and examines, in particular, the conditions under which capital controls may be justified. A key conclusion ...
More
This chapter reviews some arguments on the appropriate management of capital inflow surges and examines, in particular, the conditions under which capital controls may be justified. A key conclusion is that if the economy is operating near potential, if the level of reserves is adequate, and if the exchange rate is not undervalued, then use of capital controls—in addition to both prudential and macroeconomic policy—is justified as part of the policy toolkit to manage the macroeconomic risks that inflow surges may bring. Such controls can moreover retain potency even if investors devise strategies to bypass them, provided such strategies are more costly than the expected return from the transaction.Less
This chapter reviews some arguments on the appropriate management of capital inflow surges and examines, in particular, the conditions under which capital controls may be justified. A key conclusion is that if the economy is operating near potential, if the level of reserves is adequate, and if the exchange rate is not undervalued, then use of capital controls—in addition to both prudential and macroeconomic policy—is justified as part of the policy toolkit to manage the macroeconomic risks that inflow surges may bring. Such controls can moreover retain potency even if investors devise strategies to bypass them, provided such strategies are more costly than the expected return from the transaction.
Ashoka Mody
- Published in print:
- 2018
- Published Online:
- May 2018
- ISBN:
- 9780199351381
- eISBN:
- 9780190873721
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/oso/9780199351381.003.0005
- Subject:
- Economics and Finance, International, Macro- and Monetary Economics
This chapter looks at the strong global economic recovery which took place in mid-2004, which accelerated world trade growth to historically high rates—a special advantage to European nations who all ...
More
This chapter looks at the strong global economic recovery which took place in mid-2004, which accelerated world trade growth to historically high rates—a special advantage to European nations who all rely heavily for their economic well-being on international trade. With improved trade opportunities, even the struggling German economy began to show signs of life. The Eurozone, however, had economic and financial vulnerability. A source of instability inherent to monetary unity was vividly manifest during the crisis of the European Exchange Rate Mechanism (ERM) in the early 1990s. A longer-term problem was the Eurozone's banks. Ultimately, the story of the next three years—between mid-2004 and mid-2007—revolves around a contest between the forces of “great moderation” and “irrational exuberance.” In the Eurozone, as member states benefited from an improving global economy, a belief in the European Central Bank's (ECB) distinctive ability to maintain stability reinforced the narrative of great moderation.Less
This chapter looks at the strong global economic recovery which took place in mid-2004, which accelerated world trade growth to historically high rates—a special advantage to European nations who all rely heavily for their economic well-being on international trade. With improved trade opportunities, even the struggling German economy began to show signs of life. The Eurozone, however, had economic and financial vulnerability. A source of instability inherent to monetary unity was vividly manifest during the crisis of the European Exchange Rate Mechanism (ERM) in the early 1990s. A longer-term problem was the Eurozone's banks. Ultimately, the story of the next three years—between mid-2004 and mid-2007—revolves around a contest between the forces of “great moderation” and “irrational exuberance.” In the Eurozone, as member states benefited from an improving global economy, a belief in the European Central Bank's (ECB) distinctive ability to maintain stability reinforced the narrative of great moderation.
André Sapir
- Published in print:
- 2016
- Published Online:
- August 2016
- ISBN:
- 9780198754688
- eISBN:
- 9780191816260
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780198754688.003.0004
- Subject:
- Economics and Finance, Macro- and Monetary Economics
In light of the recent financial and sovereign debt crisis, there is now a large consensus that something was fundamentally wrong with Europe’s Economic and Monetary Union (EMU). The original design ...
More
In light of the recent financial and sovereign debt crisis, there is now a large consensus that something was fundamentally wrong with Europe’s Economic and Monetary Union (EMU). The original design clearly lacked institutional mechanisms to deal with financial and sovereign debt crises. It also under-estimated the fundamental message of the optimum currency area (OCA) theory that countries in a monetary union can be subject to asymmetric shocks and that occurrence of such shocks was likely to be high in EMU, at least during its early years, because of the heterogeneity of its members. This chapter proposes the creation of national and EMU institutional mechanisms to reduce the occurrence of asymmetric shocks in the future, and to make adjustment to such shocks smoother than it is currently.Less
In light of the recent financial and sovereign debt crisis, there is now a large consensus that something was fundamentally wrong with Europe’s Economic and Monetary Union (EMU). The original design clearly lacked institutional mechanisms to deal with financial and sovereign debt crises. It also under-estimated the fundamental message of the optimum currency area (OCA) theory that countries in a monetary union can be subject to asymmetric shocks and that occurrence of such shocks was likely to be high in EMU, at least during its early years, because of the heterogeneity of its members. This chapter proposes the creation of national and EMU institutional mechanisms to reduce the occurrence of asymmetric shocks in the future, and to make adjustment to such shocks smoother than it is currently.
Jean Pisani-Ferry
- Published in print:
- 2014
- Published Online:
- May 2014
- ISBN:
- 9780199993338
- eISBN:
- 9780199346400
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780199993338.003.0005
- Subject:
- Economics and Finance, Financial Economics
The euro, when launched on January 1, 1999 should have had the staunch support of all the countries that joined the endeavor. However, despite having fought to secure the project’s fate and their ...
More
The euro, when launched on January 1, 1999 should have had the staunch support of all the countries that joined the endeavor. However, despite having fought to secure the project’s fate and their countries’ qualification, Europe’s leaders gave the impression that the currency they had created was not really theirs when the European Central Bank took over responsibility for monetary policy in 1999. Most of the promoters of the common currency had hoped that it would lead to substantial changes in the distribution of competences, to strengthened economic governance and policy coordination, and common political institutions. Instead, the euro was born an orphan currency, having been forsaken by the greater European project that gave it meaning. Although the technical preparation and the transition to the new currency was flawless, many countries did not pay attention to their ability to function in a monetary union, and what this would require in terms of adapting economic policy.Less
The euro, when launched on January 1, 1999 should have had the staunch support of all the countries that joined the endeavor. However, despite having fought to secure the project’s fate and their countries’ qualification, Europe’s leaders gave the impression that the currency they had created was not really theirs when the European Central Bank took over responsibility for monetary policy in 1999. Most of the promoters of the common currency had hoped that it would lead to substantial changes in the distribution of competences, to strengthened economic governance and policy coordination, and common political institutions. Instead, the euro was born an orphan currency, having been forsaken by the greater European project that gave it meaning. Although the technical preparation and the transition to the new currency was flawless, many countries did not pay attention to their ability to function in a monetary union, and what this would require in terms of adapting economic policy.
