nep-ifn New Economics Papers
on International Finance
Issue of 2016‒03‒10
three papers chosen by
Vimal Balasubramaniam
University of Oxford

  1. Inflation Targeting and Exchange Rate Regimes in Emerging Markets By Christian Ebeke; Armand Fouejieu
  2. Are Capital Inflows Expansionary or Contractionary? Theory, Policy Implications, and Some Evidence By Olivier J. Blanchard; Jonathan David Ostry; Atish R. Ghosh; Marcos Chamon
  3. Capital Account Liberalization and Inequality By Davide Furceri; Prakash Loungani

  1. By: Christian Ebeke; Armand Fouejieu
    Abstract: This paper investigates the effects of the adoption of inflation targeting (IT) on the choice of exchange rate regime in emerging markets (EMs), conditional on certain macroeconomic conditions. Using a large sample of EMs and after controlling for the selection bias associated with the adoption of IT, we find that IT countries on average have a relatively more flexible exchange rate regime than other EMs. However, the flexibility of the exchange rate regime shows strong heterogeneity among IT countries depending on their degree of openness and exposure to FX risks. Moreover, we find that the marginal effect of IT adoption on the exchange rate flexibility increases with the duration of the IT regime in place, and with the propensity scores to adopt it.
    Date: 2015–10–28
  2. By: Olivier J. Blanchard; Jonathan David Ostry; Atish R. Ghosh; Marcos Chamon
    Abstract: The workhorse open-economy macro model suggests that capital inflows are contractionary because they appreciate the currency and reduce net exports. Emerging market policy makers however believe that inflows lead to credit booms and rising output, and the evidence appears to go their way. To reconcile theory and reality, we extend the set of assets included in the Mundell-Fleming model to include both bonds and non-bonds. At a given policy rate, inflows may decrease the rate on non-bonds, reducing the cost of financial intermediation, potentially offsetting the contractionary impact of appreciation. We explore the implications theoretically and empirically, and find support for the key predictions in the data.
    Keywords: Foreign exchange intervention;Capital controls;capital inflows, bonds, bond, return, domestic bonds, All Countries, apital inflows,
    Date: 2015–10–23
  3. By: Davide Furceri; Prakash Loungani
    Abstract: This paper examines the distributional impact of capital account liberalization. Using panel data for 149 countries from 1970 to 2010, we find that, on average, capital account liberalization reforms increase inequality and reduce the labor share of income in the short and medium term. We also find that the level of financial development and the occurrence of crises play a key role in shaping the response of inequality to capital account liberalization reforms.
    Keywords: Globalization;Inequality, Capital Account Openness, Crises, Institutions, capital account, liberalization, capital account liberalization, standard deviations, Macroeconomic Analyses of Economic Development, All Countries, Institutions.,
    Date: 2015–11–24

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