nep-ifn New Economics Papers
on International Finance
Issue of 2006‒05‒13
seven papers chosen by
Yi-Nung Yang
Chung Yuan Christian University

  1. Are There Thresholds of Current Account Adjustment in the G7? By Richard H. Clarida; Manuela Goretti; Mark P. Taylor
  2. G7 Current Account Imbalances: Sustainability and Adjustment By Richard H. Clarida
  3. The Foreign Exchange Rate Exposure of Nations By Horst Entorf; Jochen Moebert; Katja Sonderhof
  4. Stabilization of Effective Exchange Rates Under Common Currency Basket Systems By Eiji Ogawa; Junko Shimizu
  5. The Effects of Exchange Rate Risk on Economic Performance : The Turkish Experience By Hakan Berument; Nergiz Dinçer
  6. Did inflation really soar after the euro cash changeover? Indirect evidence from ATM withdrawals By Paolo Angelini; Francesco Lippi
  7. Measuring Monetary Policy for A Small Open Economy : Turkey By Hakan Berument

  1. By: Richard H. Clarida; Manuela Goretti; Mark P. Taylor
    Abstract: We find evidence of threshold behavior in current account adjustment for the G7 countries, such that the dynamics of adjustment towards equilibrium depend upon whether the current-account/ net-output ratio breaches estimated, country specific current account surplus or deficit thresholds. Both the speeds of adjustment and the size of the thresholds are found to differ significantly across countries. In addition, we also find evidence of shifts in means and variances of exchange rate changes, stock returns, and interest differentials that coincide with the current account adjustment regimes identified by the model.
    JEL: F3 F4
    Date: 2006–05
  2. By: Richard H. Clarida
    Abstract: This volume collects the eleven original papers that were written for the NBER Project on G7 Current Account Imbalances. Four major themes emerged from the papers written for the project. First, there was broad agreement that the current account imbalances that prevailed among the G7 countries as of June 2005 would ultimately decline, although there was no consensus on when or how this would occur . Second, there was agreement that adjustments in global currency markets would likely be associated with the shifts in global saving and investment patterns that would be required to bring about the ultimate decline in G7 current account imbalances. Third, while the focus of the conference was on current account imbalances in the G7 countries, it was recognized that the aggregate excess of saving over investment that existed among the emerging market economies at the time of the conference, as well as the currency intervention policies of some of these countries, were contributing to the current imbalances in the G7 that prevailed as of June 2005. Fourth, there was a consensus that re-valuation of the evolving foreign asset and liability positions of the G7 countries would play a role during process by which current account imbalances narrowed, although there was range of opinion concerning how large a role such revaluation effects would play.
    JEL: F3 F4
    Date: 2006–05
  3. By: Horst Entorf (Institut für Volkswirtschaftslehre (Department of Economics), Technische Universität Darmstadt (Darmstadt University of Technology)); Jochen Moebert (Institut für Volkswirtschaftslehre (Department of Economics), Technische Universität Darmstadt (Darmstadt University of Technology)); Katja Sonderhof (Institut für Volkswirtschaftslehre (Department of Economics), Technische Universität Darmstadt (Darmstadt University of Technology))
    Abstract: Following the well-known approach by Adler and Dumas (1984), we evaluate the foreign exchange rate exposure of nations. Results based on data from 27 countries show that national foreign exchange rate exposures are significantly related to the current balance variables of corresponding economies.
    Keywords: Exchange rate exposure, international trade, current balance.
    JEL: G15 F31
    Date: 2006–04
  4. By: Eiji Ogawa; Junko Shimizu
    Abstract: We investigate the extent to which a common currency basket peg would stabilize effective exchange rates of East Asian currencies. We use an AMU (Asian Monetary Unit), which is a weighted average of ASEAN10 plus 3 (Japan, China, and Korea) currencies, as a common currency basket to investigate the stabilization effects. We compare our results with another result on stabilization effects of the common G3 currency (the US dollar, the Japanese yen, and the euro) basket in the East Asian countries (Williamson (2005)). We obtained the following results: first, the AMU peg system would be more effective in reducing fluctuations of the effective exchange rates as more countries applied the AMU peg system in East Asia. Second, the AMU peg system would more effectively stabilize the effective exchange rates than a common G-3 currency basket peg system for four (Indonesia, the Philippines, South Korea and Thailand) of the seven countries. The results suggest that the AMU basket peg would be useful for the East Asian countries whose trade weights on Japan are relatively higher than others.
    JEL: E6 F3 F4
    Date: 2006–05
  5. By: Hakan Berument; Nergiz Dinçer
    Date: 2005
  6. By: Paolo Angelini (Bank of Italy, Economic Research Department); Francesco Lippi (Bank of Italy, Economic Research Department)
    Abstract: The introduction of the euro notes and coins in the first two months of 2002 was followed by a lively debate on the alleged inflationary effects of the new currency. In Italy, as in the rest of the euro area, survey-based measures signaled a much sharper rise in inflation than measured by the official price indices, whose quality was called into question. In this paper we gather indirect evidence on the behavior of prices from the analysis of cash withdrawals from ATM and their determinants. Since these data do not rely on official inflation statistics, they provide an independent check for the latter. We present a model in which the relationship between aggregate ATM withdrawals and aggregate expenditure is not homogenous of degree one in the price level, a prediction which is strongly supported by the data. This feature allows us to test the hypothesis that, after the introduction of the euro notes and coins, consumer prices underwent an increase not recorded by official inflation statistics. We do not find evidence in support of this hypothesis.
    Keywords: banknotes, currency, euro, inflation.
    JEL: E41 E31 E51
    Date: 2006–03
  7. By: Hakan Berument
    Date: 2005

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