Dominant Currency Paradigm A New Model For Small Open Economies

Dominant Currency Paradigm A New Model For Small Open Economies Book in PDF, ePub and Kindle version is available to download in english. Read online anytime anywhere directly from your device. Click on the download button below to get a free pdf file of Dominant Currency Paradigm A New Model For Small Open Economies book. This book definitely worth reading, it is an incredibly well-written.

Dominant Currency Paradigm: A New Model for Small Open Economies

Camila Casas,Mr.Federico Diez,Gita Gopinath,Pierre-Olivier Gourinchas
Dominant Currency Paradigm A New Model for Small Open Economies Book PDF

Author : Camila Casas,Mr.Federico Diez,Gita Gopinath,Pierre-Olivier Gourinchas
Publisher : International Monetary Fund
Page : 62 pages
File Size : 52,5 Mb
Release : 2017-11-22
Category : Business & Economics
ISBN : 9781484330173

Get Book

Dominant Currency Paradigm: A New Model for Small Open Economies by Camila Casas,Mr.Federico Diez,Gita Gopinath,Pierre-Olivier Gourinchas Pdf

Most trade is invoiced in very few currencies. Despite this, the Mundell-Fleming benchmark and its variants focus on pricing in the producer’s currency or in local currency. We model instead a ‘dominant currency paradigm’ for small open economies characterized by three features: pricing in a dominant currency; pricing complementarities, and imported input use in production. Under this paradigm: (a) the terms-of-trade is stable; (b) dominant currency exchange rate pass-through into export and import prices is high regardless of destination or origin of goods; (c) exchange rate pass-through of non-dominant currencies is small; (d) expenditure switching occurs mostly via imports, driven by the dollar exchange rate while exports respond weakly, if at all; (e) strengthening of the dominant currency relative to non-dominant ones can negatively impact global trade; (f) optimal monetary policy targets deviations from the law of one price arising from dominant currency fluctuations, in addition to the inflation and output gap. Using data from Colombia we document strong support for the dominant currency paradigm.

Dominant Currency Paradigm: A New Model for Small Open Economies

Camila Casas,Mr.Federico Diez,Gita Gopinath,Pierre-Olivier Gourinchas
Dominant Currency Paradigm A New Model for Small Open Economies Book PDF

Author : Camila Casas,Mr.Federico Diez,Gita Gopinath,Pierre-Olivier Gourinchas
Publisher : International Monetary Fund
Page : 62 pages
File Size : 43,8 Mb
Release : 2017-11-22
Category : Business & Economics
ISBN : 9781484330609

Get Book

Dominant Currency Paradigm: A New Model for Small Open Economies by Camila Casas,Mr.Federico Diez,Gita Gopinath,Pierre-Olivier Gourinchas Pdf

Most trade is invoiced in very few currencies. Despite this, the Mundell-Fleming benchmark and its variants focus on pricing in the producer’s currency or in local currency. We model instead a ‘dominant currency paradigm’ for small open economies characterized by three features: pricing in a dominant currency; pricing complementarities, and imported input use in production. Under this paradigm: (a) the terms-of-trade is stable; (b) dominant currency exchange rate pass-through into export and import prices is high regardless of destination or origin of goods; (c) exchange rate pass-through of non-dominant currencies is small; (d) expenditure switching occurs mostly via imports, driven by the dollar exchange rate while exports respond weakly, if at all; (e) strengthening of the dominant currency relative to non-dominant ones can negatively impact global trade; (f) optimal monetary policy targets deviations from the law of one price arising from dominant currency fluctuations, in addition to the inflation and output gap. Using data from Colombia we document strong support for the dominant currency paradigm.

Dominant Currencies and External Adjustment

Gustavo Adler,Camila Casas,Mr.Luis M. Cubeddu,Ms.Gita Gopinath,Ms.Nan Li,Sergii Meleshchuk,Ms.Carolina Osorio Buitron,Mr.Damien Puy,Mr.Yannick Timmer
Dominant Currencies and External Adjustment Book PDF

Author : Gustavo Adler,Camila Casas,Mr.Luis M. Cubeddu,Ms.Gita Gopinath,Ms.Nan Li,Sergii Meleshchuk,Ms.Carolina Osorio Buitron,Mr.Damien Puy,Mr.Yannick Timmer
Publisher : International Monetary Fund
Page : 46 pages
File Size : 42,6 Mb
Release : 2020-07-20
Category : Business & Economics
ISBN : 9781513512150

Get Book

Dominant Currencies and External Adjustment by Gustavo Adler,Camila Casas,Mr.Luis M. Cubeddu,Ms.Gita Gopinath,Ms.Nan Li,Sergii Meleshchuk,Ms.Carolina Osorio Buitron,Mr.Damien Puy,Mr.Yannick Timmer Pdf

The extensive use of the US dollar when firms set prices for international trade (dubbed dominant currency pricing) and in their funding (dominant currency financing) has come to the forefront of policy debate, raising questions about how exchange rates work and the benefits of exchange rate flexibility. This Staff Discussion Note documents these features of international trade and finance and explores their implications for how exchange rates can help external rebalancing and buffer macroeconomic shocks.

Global Trade and the Dollar

Ms.Emine Boz,Gita Gopinath,Mikkel Plagborg-Møller
Global Trade and the Dollar Book PDF

Author : Ms.Emine Boz,Gita Gopinath,Mikkel Plagborg-Møller
Publisher : International Monetary Fund
Page : 66 pages
File Size : 52,7 Mb
Release : 2017-11-13
Category : Business & Economics
ISBN : 9781484328859

Get Book

Global Trade and the Dollar by Ms.Emine Boz,Gita Gopinath,Mikkel Plagborg-Møller Pdf

We document that the U.S. dollar exchange rate drives global trade prices and volumes. Using a newly constructed data set of bilateral price and volume indices for more than 2,500 country pairs, we establish the following facts: 1) The dollar exchange rate quantitatively dominates the bilateral exchange rate in price pass-through and trade elasticity regressions. U.S. monetary policy induced dollar fluctuations have high pass-through into bilateral import prices. 2) Bilateral non-commodities terms of trade are essentially uncorrelated with bilateral exchange rates. 3) The strength of the U.S. dollar is a key predictor of rest-of-world aggregate trade volume and consumer/producer price inflation. A 1 percent U.S. dollar appreciation against all other currencies in the world predicts a 0.6–0.8 percent decline within a year in the volume of total trade between countries in the rest of the world, controlling for the global business cycle. 4) Using a novel Bayesian semiparametric hierarchical panel data model, we estimate that the importing country’s share of imports invoiced in dollars explains 15 percent of the variance of dollar pass-through/elasticity across country pairs. Our findings strongly support the dominant currency paradigm as opposed to the traditional Mundell-Fleming pricing paradigms.

Currencies, Capital, and Central Bank Balances

John Cochrane,Kyle Palermo,John Taylor
Currencies Capital and Central Bank Balances Book PDF

Author : John Cochrane,Kyle Palermo,John Taylor
Publisher : Hoover Press
Page : 368 pages
File Size : 52,9 Mb
Release : 2019-04-01
Category : Business & Economics
ISBN : 9780817922368

Get Book

Currencies, Capital, and Central Bank Balances by John Cochrane,Kyle Palermo,John Taylor Pdf

Drawing from their 2018 conference, the Hoover Institution brings together leading academics and monetary policy makers to share ideas about the practical issues facing central banks today. The expert contributors discuss U.S. monetary policy at individual central banks and reform of the international monetary and financial system. The discussion is broken down into seven key areas: 1) International Rules of the Monetary Game; 2) Banking, Trade and the Making of the Dominant Currency; 3) Capital Flows, the IMF's Institutional View and Alternatives; 4) Payments, Credit and Asset Prices; 5) Financial Stability, Regulations and the Balance Sheet; 6) The Future of the Central Bank Balance Sheet; and 7) Monetary Policy and Reform in Practice. With in-depth discussions of the volatility of capital flows and exchange rates, and the use of balance sheet policy by central banks, they examine relevant research developments and debate policy options.

Intervention Under Inflation Targeting--When Could It Make Sense?

Mr.David J Hofman,Mr.Marcos d Chamon,Mr.Pragyan Deb,Mr.Thomas Harjes,Umang Rawat,Itaru Yamamoto
Intervention Under Inflation Targeting When Could It Make Sense Book PDF

Author : Mr.David J Hofman,Mr.Marcos d Chamon,Mr.Pragyan Deb,Mr.Thomas Harjes,Umang Rawat,Itaru Yamamoto
Publisher : International Monetary Fund
Page : 22 pages
File Size : 51,6 Mb
Release : 2020-01-17
Category : Business & Economics
ISBN : 9781513526027

Get Book

Intervention Under Inflation Targeting--When Could It Make Sense? by Mr.David J Hofman,Mr.Marcos d Chamon,Mr.Pragyan Deb,Mr.Thomas Harjes,Umang Rawat,Itaru Yamamoto Pdf

We investigate the motives inflation-targeting central banks in emerging markets may have for intervening in foreign exchange markets and evaluate the case for such interventions based on the existing literature. Our findings suggest that the rationale for interventions depends on initial conditions and country-specific circumstances. The case is strongest in the presence of large currency mismatches or underdeveloped markets. While interventions can have benefits in the short-term, sustained over time they could entrench unfavorable initial conditions, though more work is needed to establish this empirically. A first effort to measure the cost of interventions to the credibility of policy frameworks suggests that the negative impact may be smaller than often assumed—at least for the set of more sophisticated inflation-targeting emerging-market central banks considered here.

External Sector Report, July 2019

International Monetary Fund. Monetary and Capital Markets Department
External Sector Report July 2019 Book PDF

Author : International Monetary Fund. Monetary and Capital Markets Department
Publisher : International Monetary Fund
Page : 116 pages
File Size : 48,9 Mb
Release : 2019-07-17
Category : Business & Economics
ISBN : 9781498322751

Get Book

External Sector Report, July 2019 by International Monetary Fund. Monetary and Capital Markets Department Pdf

The IMF’s 2019 External Sector Report shows that global current account balances stand at about 3 percent of global GDP. Of this, about 35–45 percent are now deemed excessive. Meanwhile, net credit and debtor positions are at historical peaks and about four times larger than in the early 1990s. Short-term financing risks from the current configuration of external imbalances are generally contained, as debtor positions are concentrated in reserve-currency-issuing advanced economies. An intensification of trade tensions or a disorderly Brexit outcome—with further repercussions for global growth and risk aversion—could, however, affect other economies that are highly dependent on foreign demand and external financing. With output near potential in most systemic economies, a well-calibrated macroeconomic and structural policy mix is necessary to support rebalancing. Recent trade policy actions are weighing on global trade flows, investment, and growth, including through confidence effects and the disruption of global supply chains, with no discernible impact on external imbalances thus far.

Exchange Rate Fluctuations and Firm Leverage

Mr.Ilhyock Shim,Sebnem Kalemli-Ozcan,Xiaoxi Liu
Exchange Rate Fluctuations and Firm Leverage Book PDF

Author : Mr.Ilhyock Shim,Sebnem Kalemli-Ozcan,Xiaoxi Liu
Publisher : INTERNATIONAL MONETARY FUND
Page : 40 pages
File Size : 53,8 Mb
Release : 2020-12-11
Category : Business & Economics
ISBN : 1513560948

Get Book

Exchange Rate Fluctuations and Firm Leverage by Mr.Ilhyock Shim,Sebnem Kalemli-Ozcan,Xiaoxi Liu Pdf

We quantify the effect of exchange rate fluctuations on firm leverage. When home currency appreciates, firms who hold foreign currency debt and local currency assets observe higher net worth as appreciation lowers the value of their foreign currency debt. These firms can borrow more as a result and increase their leverage. When home currency depreciates, the reverse happens as firms have to de-lever with a negative shock to their balance sheets. Using firm-level data for leverage from 10 emerging market economies during the period from 2002 to 2015, we show that firms operating in countries whose non-financial sectors hold more of the debt in foreign currency, increase (decrease) their leverage relatively more after home currency appreciations (depreciations). Combining the leverage data with firm-level FX debt data for 4 emerging market countries, we further show that our results hold at the most granular level. Our quantitative results are asymmetric: the effects of depre-ciations, that are generally associated with sudden stops, are quantitatively larger than those of appreciations, which take place at a slower pace over time during capital inflow episodes. As our exercise compares depreciations and appreciations of similar size, these results are suggestive of financial frictions being more binding during depreciations than a possible relaxation of such frictions during appreciations.

Exchange Rate Economics

Ronald MacDonald
Exchange Rate Economics Book PDF

Author : Ronald MacDonald
Publisher : Routledge
Page : 334 pages
File Size : 49,9 Mb
Release : 2002-09-26
Category : Business & Economics
ISBN : 9781134838226

Get Book

Exchange Rate Economics by Ronald MacDonald Pdf

'In summary, the book is valuable as a textbook both at the advanced undergraduate level and at the graduate level. It is also very useful for the economist who wants to be brought up-to-date on theoretical and empirical research on exchange rate behaviour.' "Journal of International Economics"

Financial Markets Evolution

Galina Panova
Financial Markets Evolution Book PDF

Author : Galina Panova
Publisher : Springer Nature
Page : 357 pages
File Size : 52,8 Mb
Release : 2021-06-07
Category : Business & Economics
ISBN : 9783030713379

Get Book

Financial Markets Evolution by Galina Panova Pdf

Influenced by technological innovation, banks and their businesses are changing dramatically. This book explores the transformation and prospects of financial market institutions (banks, insurance companies, pension funds and microfinance organizations) in the context of the development of financial innovation, financial engineering and financial technologies, taking into account risks and new opportunities for development. It presents new approaches to the sustainable development of financial and credit institutions, taking into account the risk management and crisis management of their activities in the macro and microeconomic environment. Contributors from Russia, Kazakhstan, Azerbaijan, Mongolia, Ireland and Italy present their expert opinions on the practice of financial intermediaries in the conditions of economic transformation under the influence of the 4th Industrial Revolution and the Covid-19 pandemic. This book includes some of the key debates in this area including the genesis of financial markets in the paradigm of economic digitalization, the evolution of financial intermediaries from the classical model to the ecosystem, and the regulation of neo-banks. The book will be of interest to academics and practitioners in various spheres of theoretical and empirical knowledge, including economics, finance and banking, who are interested in investigation of the complex of fundamental (international and domestic) trends in the development of financial intermediation in the globalized financial markets.

Evolution or Revolution?

Olivier Blanchard,Lawrence H. Summers
Evolution or Revolution Book PDF

Author : Olivier Blanchard,Lawrence H. Summers
Publisher : MIT Press
Page : 392 pages
File Size : 55,7 Mb
Release : 2019-04-16
Category : Business & Economics
ISBN : 9780262351287

Get Book

Evolution or Revolution? by Olivier Blanchard,Lawrence H. Summers Pdf

Leading economists discuss post–financial crisis policy dilemmas, including the dangers of complacency in a period of relative stability. The Great Depression led to the Keynesian revolution and dramatic shifts in macroeconomic theory and macroeconomic policy. Similarly, the stagflation of the 1970s led to the adoption of the natural rate hypothesis and to a major reassessment of the role of macroeconomic policy. Should the financial crisis and the Great Recession lead to yet another major reassessment, to another intellectual revolution? Will it? If so, what form should it, or will it, take? These are the questions taken up in this book, in a series of contributions by policymakers and academics. The contributors discuss the complex role of the financial sector, the relative roles of monetary and fiscal policy, the limits of monetary policy to address financial stability, the need for fiscal policy to play a more active role in stabilization, and the relative roles of financial regulation and macroprudential tools. The general message is a warning against going back to precrisis ways—to narrow inflation targeting, little use of fiscal policy for stabilization, and insufficient financial regulation. Contributors David Aikman, Alan J. Auerbach, Ben S. Bernanke, Olivier Blanchard, Lael Brainard, Markus K. Brunnermeier, Marco Buti, Benoît Cœuré, Mario Draghi, Barry Eichengreen, Jason Furman, Gita Gopinath, Pierre-Olivier Gourinchas, Andrew G. Haldane, Philipp Hildebrand, Marc Hinterschweiger, Sujit Kapadia, Nellie Liang, Adam S. Posen, Raghuram Rajan, Valerie Ramey, Carmen Reinhart, Dani Rodrik, Robert E. Rubin, Jay C. Shambaugh, Tharman Shanmugaratnam, Jeremy C. Stein, Lawrence H. Summers

Considerations on the Role of the SDR

International Monetary Fund. Finance Dept.,International Monetary Fund. Monetary and Capital Markets Department,International Monetary Fund. Research Dept.,International Monetary Fund. Strategy, Policy, & Review Department,International Monetary Fund. Statistics Dept.,International Monetary Fund. Legal Dept.
Considerations on the Role of the SDR Book PDF

Author : International Monetary Fund. Finance Dept.,International Monetary Fund. Monetary and Capital Markets Department,International Monetary Fund. Research Dept.,International Monetary Fund. Strategy, Policy, & Review Department,International Monetary Fund. Statistics Dept.,International Monetary Fund. Legal Dept.
Publisher : International Monetary Fund
Page : 47 pages
File Size : 55,6 Mb
Release : 2018-04-11
Category : Business & Economics
ISBN : 9781498307390

Get Book

Considerations on the Role of the SDR by International Monetary Fund. Finance Dept.,International Monetary Fund. Monetary and Capital Markets Department,International Monetary Fund. Research Dept.,International Monetary Fund. Strategy, Policy, & Review Department,International Monetary Fund. Statistics Dept.,International Monetary Fund. Legal Dept. Pdf

This paper explores whether a broader role for the SDR could contribute to the smooth functioning and stability of the international monetary system (IMS). Recent staff assessments highlighted that the IMS has displayed considerable resilience. But episodes of stress point also to some weaknesses, including in external adjustment mechanisms; limitations of official liquidity provisions through the Global Financial Safety Net (GFSN); and large-scale reserve accumulation—with systemic side effects. Those weaknesses, together with the expansion of the SDR basket, have renewed interest in the SDR and motivated a discussion of whether there is an economic rationale for a broader SDR role. The paper looks into how those weaknesses can be mitigated by three concepts of the SDR: the official SDR, the reserve asset administered by the IMF (O-SDR); SDR-denominated financial instruments, or “market SDRs” (M-SDR); and the SDR as a unit of account (U-SDR). However, the paper does not propose specific reform options.

The Inflexible Structure of Global Supply Chains

Mr.Tamim Bayoumi,Jelle Barkema,Diego A. Cerdeiro
The Inflexible Structure of Global Supply Chains Book PDF

Author : Mr.Tamim Bayoumi,Jelle Barkema,Diego A. Cerdeiro
Publisher : International Monetary Fund
Page : 41 pages
File Size : 40,8 Mb
Release : 2019-09-13
Category : Business & Economics
ISBN : 9781513510569

Get Book

The Inflexible Structure of Global Supply Chains by Mr.Tamim Bayoumi,Jelle Barkema,Diego A. Cerdeiro Pdf

The rise of global supply chains has had profound effects on individual economies and the global trading system, thereby complicating standard macroeconomic analyses. For many of the new and challenging questions brought about by this phenomenon, such as its impact on the global business cycle and measurements of competitiveness, the answer largely depends on one specific aspect of global value chains: how easily they can re-configure in response to changes in prices. We propose a parsimonious, generalized specification to test the degree of global-supply-chain flexibility. Our estimates show that, in the short run, the production structure is highly inflexible, and that this rigidity has, if anything, risen over time as supply chains have deepened over time. This finding is robust to alternative price measures, including those that account for the U.S. dollar’s outsized role in trade through invoicing. While in the long run all estimated elasticities rise, supply chains remain somewhat inflexible. Our results have implications for analyses of cross-country business-cycle dynamics, the propagation of sectoral shocks, and the measurement of international competitiveness.

Development and Stabilization in Small Open Economies

DeLisle Worrell
Development and Stabilization in Small Open Economies Book PDF

Author : DeLisle Worrell
Publisher : Taylor & Francis
Page : 391 pages
File Size : 42,6 Mb
Release : 2023-01-06
Category : Political Science
ISBN : 9781000824544

Get Book

Development and Stabilization in Small Open Economies by DeLisle Worrell Pdf

This book analyses and explains the nature of the economies of small countries and territories. It includes an assessment of material prosperity in 41 small open economies worldwide, with case studies focusing on the Caribbean and Central America, with a review of the development of their economies in recent decades. The volume recommends a suite of economic policy tools for the management of these economies, demonstrating how these may best be employed in economies that live and breathe through international commerce. Among observations of interest is the fact that the devaluation of the local currency of a small nation makes the country worse off; even a currency that maintains its value is little more than a trophy, of little value if it is not readily convertible into US dollars. Also, that while government policies affect international competitiveness and a small country's growth prospects, more important is how governments use additional resources to improve the quality of health and educational services. Moreover, economic windfalls such as the discovery of mineral resources seldom bring prosperity commensurate with their economic value, and never in the short run. The volume will offer invaluable information and analysis to researchers and policy makers investigating small open economies.

Monetary Policy and Exchange Rate Dynamics in a Behavioral Open Economy Model

Marcin Kolasa,Sahil Ravgotra,Pawel Zabczyk
Monetary Policy and Exchange Rate Dynamics in a Behavioral Open Economy Model Book PDF

Author : Marcin Kolasa,Sahil Ravgotra,Pawel Zabczyk
Publisher : International Monetary Fund
Page : 44 pages
File Size : 52,7 Mb
Release : 2022-06-03
Category : Business & Economics
ISBN : 9798400211935

Get Book

Monetary Policy and Exchange Rate Dynamics in a Behavioral Open Economy Model by Marcin Kolasa,Sahil Ravgotra,Pawel Zabczyk Pdf

We develop an extension of the open economy New Keynesian model in which agents are boundedly rational à la Gabaix (2020). Our setup nests rational expectations (RE) as a special case and it can successfully mitigate many “puzzling” aspects of the relationship between exchange rates and interest rates. Since the model implies an uncovered interest rate parity (UIP) condition featuring behavioral expectations, our results are also consistent with recent empirical evidence showing that several UIP puzzles vanish when actual exchange rate expectations are used (instead of realizations implicitly coupled with the RE assumption). We find that cognitive discounting dampens the effects of current monetary shocks and lowers the efficacy of forward guidance (FG), but its relative importance in mitigating the so-called FG puzzle is decreasing in openness. Finally, we show that accounting for myopia exacerbates the small open economy unit-root problem, makes positive monetary spillovers more likely, and increases the persistence of net foreign assets and the real exchange rate.