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on International Finance |
| By: | Pietro Alessandrini (Universit… Politecnica delle Marche, Department of Economics, MoFiR); Andrea Filippo Presbitero (Universit… Politecnica delle Marche, Department of Economics, MoFiR) |
| Abstract: | The global financial crisis, the weakening role of the dollar and the increasing importance of China in the global arena are calling for a reform of the international monetary system (IMS) in the direction of a greater multilateralism. We agree with the necessity to reform the IMS and we advance a proposal based on a greater role of the Special Drawing Rights (SDRs), focusing on the potential benefits that a new monetary order could brings to Low-Income Countries (LICs). Given their extreme vulnerability to external shocks and their dependence on the exchange rate vis-vis the US dollar, poor countries would benefit from the creation of a more stable multi-currency monetary system. The new SDRs will created exogenously - with a disproportionate allocation to LICs -, but also endogenously, through the substitution account and the overdraft facility. Finally, we discuss the superiority of this proposal in the context of the current foreign assistance framework. |
| Keywords: | International Mometary System, Key Currency, Low-Income Countries, Reserves, SDR |
| JEL: | F33 F35 O11 O19 |
| Date: | 2011–09 |
| URL: | http://d.repec.org/n?u=RePEc:anc:wmofir:55&r=ifn |
| By: | Smith, Constance (University of Alberta, Department of Economics) |
| Abstract: | Large external imbalances have become a policy concern. This study investigates the determinants of external balances for regions within a single country — Canadian provinces — as well as for a sample of 18 OECD countries. External balance adjustment may differ for provinces since there are few intranational barriers to the mobility of capital, goods and labour within Canada. Also, because Canada is a monetary union, there is no currency risk associated with lending and borrowing across provinces, and this may promote inter-provincial financial flows. The estimates show that the short run response of the external balance to disturbances, such as a deterioration in the terms of trade, is typically larger for Canadian provinces than for OECD countries. There is also a much greater speed of adjustment of the external balance in the Canadian provinces. This faster adjustment speed, combined with the larger response of the external balance, means that provinces may see a quicker resolution of external imbalances, but larger deficits or surpluses may emerge before adjustment occurs. |
| Keywords: | current account; external balance; global imbalances; currency union |
| JEL: | F32 F36 |
| Date: | 2011–03–01 |
| URL: | http://d.repec.org/n?u=RePEc:ris:albaec:2011_013&r=ifn |
| By: | Fabrizio Perri (University of Minnesota and Federal Reserve Bank of Minneapolis (email: fperri@umn.edu)); Vincenzo Quadrini (University of Southern California) |
| Abstract: | The 2008-2009 crisis was characterized by an unprecedented degree of international synchronization as all major industrialized countries experienced large macroeconomic contractions. Countries also experienced large and synchronized contractions in the growth of financial flows. In this paper we present a two-country model with financial markets frictions where credit-driven recessions can explain these features of the recent crisis. A credit contraction can emerge as a self-fulling equilibrium caused by pessi- mistic but fully rational expectations. As a result of the credit contraction, in a financially integrated world, countries experience large and, endogenously synchronized, declines in asset prices and economic activity ( international recessions). |
| Date: | 2011–09 |
| URL: | http://d.repec.org/n?u=RePEc:ime:imedps:11-e-26&r=ifn |
| By: | Michel Beine; Elisabetta Lodigiani; Robert Vermeulen |
| Abstract: | Migrant remittances increased strongly since the 1980s, becoming an important and reliable source of funds for many developing countries. Therefore, there is a strong incentive for receiving countries to attract more remittances, especially through formal channels that turn to be either less expensive and/or less risky than informal ones. One way of doing so is to increase their country’s financial openness, but this policy option might also generate additional costs in terms of macroeconomic volatility. In this paper we investigate the link between remittance receipts and financial openness. We develop a small model and statistically test for the existence of such a relationship with a sample of 66 mostly developing countries from 1980-2005. Empirically we use a dynamic generalized ordered logit model to deal with the categorical nature of the financial openness policy. We apply a two-step method akin to two stage least squares to deal with the endogeneity of remittances and potential measurement errors. We find a strong positive statistical and economic effect of remittances on financial openness. |
| Keywords: | remittances; financial openness; government policy |
| JEL: | E60 F24 F41 O10 |
| Date: | 2011–08 |
| URL: | http://d.repec.org/n?u=RePEc:dnb:dnbwpp:317&r=ifn |
| By: | Ayyagari, Meghana; Demirguc-Kunt, Asli; Maksimovic, Vojislav |
| Abstract: | This paper provides empirical evidence on firm recoveries from financial system collapses in developing countries (systemic sudden stops episodes), and compares them with the experience in the United States in the 2008 financial crisis. Prior research found that economies recover from systemic sudden stop episodes before the financial sector. These recoveries are called Phoenix miracles, and the research questioned the role of the financial system in recovery. Although an average of the macro data across a sample of systemic sudden stop episodes over the 1990s appears consistent with the notion of Phoenix recoveries, closer inspection reveals heterogeneity of responses across the countries, with only a few countries fitting the pattern. Micro data show that across countries, only a small fraction (less than 31 percent) of firms follow a pattern of recovery in sales without a recovery in external credit, and even these firms have access to external sources of cash. The experience of firms in the United States during the 2008 financial crisis also suggests no evidence of credit-less recoveries. An examination of the dynamics of firms'financing, investment and payout policies during recovery periods shows that far from being constrained, the firms in the sample are able to access long-term financing, issue equity, and significantly expand their cash holdings. |
| Keywords: | Debt Markets,Access to Finance,Bankruptcy and Resolution of Financial Distress,Emerging Markets,Economic Theory&Research |
| Date: | 2011–09–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:5799&r=ifn |