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on Open MacroEconomics |
| By: | Tuomas A. Peltonen (European Central Bank, Kaiserstrasse 29, D-60311 Frankfurt am Main, Germany.); Michael Sager (Wellington Management, 75 State Street, Boston, MA 02109, USA.) |
| Abstract: | We reappraise the relationship between productivity and equilibrium real exchange rates using a panel estimation framework that incorporates a large number of countries and importantly, a dataset that allows explicit consideration of the role of non-traded, as well as traded, sector productivity shocks in exchange rate determination. We find evidence of significant correlation between real exchange rates and productivity differentials in both sectors. But our finding of a significant role for the non-traded sector in exchange rate determination, and of a relatively larger correlation between exchange rates and productivity shocks of a given size emanating from this sector, represent clear contradictions of the widely cited Balassa-Samuelson hypothesis. Our findings remain valid in the face of a number of robustness tests, including the exchange rate regime and numéraire currency. JEL Classification: F31, O47, C23. |
| Keywords: | Exchange rate, productivity, Balassa-Samuelson, panel data, emerging market economies. |
| Date: | 2009–04 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:200901046&r=opm |
| By: | Ono, Masanori |
| Abstract: | This paper uses the structural VAR approach to examine the interactive responses between import prices and domestic prices in Japan before and after the 1990s. First, the estimation reveals that the Japanese domestic prices have become a little more vulnerable to foreign inflationary pressure through a rise in contract import prices. Second, Japan after the 1990s can pass along its domestic inflationary pressure to foreign countries with an increase in the pricing of its domestic products. Third, the results confirm that Japan’s exchange rate pass-through effect on its domestic prices has decreased, as suggested by other literature. |
| Keywords: | Structural VAR; globalization; Japanese economy |
| JEL: | C32 E31 F31 |
| Date: | 2009–03 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:14935&r=opm |
| By: | Kalemli-Ozcan, Sebnem; Papaioannou, Elias; Peydró-Alcalde, José Luis |
| Abstract: | Standard theory predicts that financial integration leads to a lower degree of business cycle synchronization. Surprisingly, cross-country studies find the opposite. Our contribution is to document the theoretically predicted negative effect of financial integration on business cycle synchronization as a robust regularity. We use a confidential dataset on banks' international bilateral exposure over the past three decades in a panel of twenty developed countries. The rich panel structure allows us to control for time-invariant country-pair factors and global trends that affect both financial integration and business cycle patterns. In contrast to previous empirical work we find that a higher degree of financial integration is associated with less synchronized output cycles. We also employ two distinct instrumental variable approaches to identify the one-way effect of integration on synchronization. These specifications reveal that the component of banking integration predicted by legislative-regulatory harmonization policies and the nature of the bilateral exchange rate regime has a negative effect on output synchronization. |
| Keywords: | Banks; Business Cycles; Co-movement; Financial Integration; Financial Regulation |
| JEL: | E32 F15 F36 G21 O16 |
| Date: | 2009–05 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:7292&r=opm |
| By: | Jean-Baptiste Gossé (CEPN - Centre d'économie de l'Université de Paris Nord - CNRS : UMR7115 - Université Paris-Nord - Paris XIII) |
| Abstract: | The model presented in this paper has two objectives. First, it models global imbalances in a simple way while conserving real and - nancial approaches. This double approach is necessary because Global Imbalances are due to the conjunction of nancial and real phenomena: the increase in the price of commodities, the accumulation of foreign reserves by the Asian central banks, the limited absorption capacity of the OPEC countries, the insucient development of the Asian nancial system and the perception of better returns in the US. The second objective is to model the global saving glut hypothesis and to show its implications. In order to avoid the recession linked to the increase of their propensity to import, the United States increase their propensity to spend. This adjustment has a cost. The Global Imbalances grow quickly with an increase of current account imbalances and NFA in both the US and Asia. The euro area supports an appreciation of its exchange rate wich put it in a long depression. |
| Keywords: | International Macroeconomics, Global Imbalances, Balance of Payments, International Finance , Simulation and Forecast |
| Date: | 2009–04–04 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-00380417_v1&r=opm |
| By: | Holinski Nils; Vermeulen Robert (METEOR) |
| Abstract: | This paper analyzes the empirical link between asset prices, consumption and the trade balance using a global macroeconometric model developed by Pesaran, Schuermann, and Weiner (2004). The model is estimated for 29 countries with quarterly data over the period 1981Q1 - 2006Q4. Motivated by increasing international financial and real integration, and pronounced cycles in stock and housing prices, we employ generalized impulse response functions for a group of five of the world''s most industrialized countries and show that shocks to asset prices transmit into consumption decisions and subsequently into the trade balance. We refer to this transmission channel as the international wealth effect and find it to be present in the US, UK and, to a lesser extent, in France, but absent in Japan and Germany. |
| Keywords: | macroeconomics ; |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:umamet:2009021&r=opm |
| By: | Lucia Alessi (Directorate General Statistics, European Central Bank, Kaiserstrasse 29, D-60311 Frankfurt am Main, Germany.); Carsten Detken (Directorate General Research, European Central Bank, Kaiserstrasse 29, D-60311 Frankfurt am Main, Germany.) |
| Abstract: | We test the performance of a host of real and financial variables as early warning indicators for costly aggregate asset price boom/bust cycles, using data for 18 OECD countries between 1970 and 2007. A signalling approach is used to predict asset price booms that have relatively serious real economy consequences. We use a loss function to rank the tested indicators given policy makers’ relative preferences with respect to missed crises and false alarms. The paper analyzes the suitability of various indicators as well as the relative performance of financial versus real, global versus domestic and money versus credit based liquidity indicators. We find that global measures of liquidity are among the best performing indicators and display forecasting records,, which provide useful information for policy makers interested in timely reactions to growing financial imbalances, as long as aversion against type I and type II errors is not too unbalanced. Furthermore, we explore out-of-sample whether the most recent wave of asset price booms (2005-2007) would be predicted to be followed by a serious economic downturn. JEL Classification: E37, E44, E51. |
| Keywords: | Early Warning Indicators, Signalling Approach, Leaning Against the Wind, Asset Price Booms and Busts, Global Liquidity. |
| Date: | 2009–03 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:200901039&r=opm |