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on Open Economy Macroeconomic |
| By: | Jean-Pierre Allegret; Valérie Mignon; Audrey Sallenave |
| Abstract: | The aim of this paper is to investigate oil price shocks’ effects and their associated transmission channels on global imbalances. To this end, we rely on a Global VAR approach that allows us to account for trade and financial interdependencies between countries. Considering a sample of 30 oil-exporting and importing economies over the 1980-2011 period, we show that the nature of the shock—demand-driven or supply-driven—matters in understanding the effects of oil price shocks on global imbalances. In addition, we evidence that the main adjustment mechanism to oil shocks is based on the trade channel, the valuation channel being at play only on the short run. |
| Keywords: | oil prices;global imbalances;global VAR |
| JEL: | C32 F32 Q43 |
| Date: | 2014–01 |
| URL: | http://d.repec.org/n?u=RePEc:cii:cepidt:2014-01&r=opm |
| By: | Bang Nam Jeon (Drexel University and Hong Kong Institute for Monetary Research); Ji Wu (Southwestern University of Finance and Economics) |
| Abstract: | Since the 1997-8 Asian financial crisis, the level of foreign bank penetration has increased steadily in Asian banking markets. This paper examines the impact of foreign banks on the monetary policy transmission mechanism in emerging Asian economies during the period from 2000 to 2009, with a specific focus on the global financial crisis of 2008-9. We present consistent evidence that, on the whole, an increase in foreign bank penetration weakened the effectiveness of the monetary policy transmission mechanism in the host emerging Asian countries during crisis periods. We also investigate various conditions and environments, including the type of monetary policy shocks, the severity of shocks upon parent banks in global crisis, the dependence of parent banks on the wholesale funding market, the country of origin of foreign banks, and entry modes, under which the effectiveness of monetary policy transmission is reduced more severely due to the increasing presence of foreign banks in the emerging Asian banking markets. |
| Keywords: | Foreign Bank Penetration, Monetary Policy Transmission, Asian Banking |
| JEL: | E44 F43 G21 |
| Date: | 2014–01 |
| URL: | http://d.repec.org/n?u=RePEc:hkm:wpaper:012014&r=opm |
| By: | Peter Flaschel; Florian Hartmann; Chris Malikane; Christian R. Proaño |
| Abstract: | The paper investigates the emergence of complex market expectations (opinion dynamics) around nominal exchange rate adjustments using a macro-financial model of a small open economy featuring heterogeneous expectation formation (chartists and fundamentalists) and gradual adjustment processes in real and also to a certain degree in financial markets. The model shows among other things the mechanisms through which the first type of agents tends to destabilise the economy. Global stability can be ensured if opinions turn to fundamentalist behaviour far off the steady state. This interaction of expectations and population dynamics is bounding the – due to chartist behavior – potentially explosive real-financial market interactions, but can enforce irregular behavior within these bounds. The size of output and exchange rate fluctuations can be dampened by adding suitable policy measures to the dynamics of the private sector. |
| Keywords: | Nonlinear Exchange Rate Dynamics, Opinion Dynamics, Viability, Persistent and Irregular Fluctuations, Macroeconomic Policy |
| JEL: | E12 E24 E31 E52 |
| Date: | 2014–01–29 |
| URL: | http://d.repec.org/n?u=RePEc:iee:wpaper:wp0098&r=opm |
| By: | Yoshiyasu Ono |
| Abstract: | This paper presents a two-country two-commodity dynamic model with free international asset trade in which one country achieves full employment and the other suffers long-run unemployment. Own and spill-over effects of changes in policy, technological and preference parameters that emerge through exchange-rate adjustment are examined. Parameter changes that worsen the stagnant countryfs current account depreciate the home currency, expand home employment and improve the foreign terms of trade, making both countries better off. The stagnant countryfs foreign aid to the fully employed country also yields the same beneficial effects. |
| Date: | 2014–01 |
| URL: | http://d.repec.org/n?u=RePEc:dpr:wpaper:0893&r=opm |
| By: | Virginie Coudert; Cécile Couharde; Valérie Mignon |
| Abstract: | The aim of this paper is to study the relationship between terms of trade and real exchange rates of commodity-producing countries on both the short and the long run. We pay particular attention to the dominant role played by oil among commodities by investigating the potential non-linear effect exerted by the situation on the oil market on the real exchange rate - terms of trade nexus. To this end, we rely on the panel smooth transition regression methodology to estimate the adjustment process of the real effective exchange rate to its equilibrium value depending on the volatility on the oil market. Considering a panel of 52 commodity exporters and 17 oil exporters over the 1980-2012 period, our findings show that while exchange rates are mainly driven by fundamentals in the low-volatility regime, they are mostly sensitive to changes in terms of trade when oil price variations exceed a certain threshold. The commodity-currency property is thus at play in the short run only for important variations in the oil price. |
| Keywords: | commodity currencies, oil price, non-linearity |
| JEL: | C23 F31 Q43 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:drm:wpaper:2014-3&r=opm |
| By: | Andrea Vaona |
| Abstract: | This paper extends the efficiency wages/partially adaptive expectations Phillips curve, otherwise known as the price-price Phillips curve, from a closed economy context to an open economy one with both commodity trade and capital mobility. We also consider the case of a monetary union (a country) with two member states (regions). The theoretical results are a priori ambiguous. However, in the first place, on resorting to plausible numerical simulations, economic openness increases the reactiveness of inflation to the unemployment rate. In regard to a monetary union, the national unemployment multiplier in the aggregate Phillips curve decreases with the weight of the member state in aggregate employment and increases with that in output. Secondly, we show in two empirical applications that our calibration can provide informative priors for models to be estimated thanks to the Kalman filter |
| Keywords: | efficiency wages, unemployment, Phillips curve, inflation, adaptive expectations, Kalman filter |
| JEL: | E3 E20 E40 E50 F15 F41 C22 |
| Date: | 2014–01 |
| URL: | http://d.repec.org/n?u=RePEc:kie:kieliw:1904&r=opm |
| By: | Blaise Gnimassoun; Valérie Mignon |
| Abstract: | This paper aims at investigating the interactions between three key macroeconomic imbalances, namely current-account discrepancies (external imbalances), output gaps (internal imbalances), and exchange-rate misalignments. To this end, we rely on the estimation of a panel VAR model for a sample of 22 industrialized countries over the 1980-2011 period. Our findings show that macroeconomic imbalances strongly interact through a causal relationship. We evidence that if current-account disequilibria threaten the stability of the global economy, their origin can be found in internal imbalances and exchange-rate misalignments: positive output-gap shocks as well as currency overvaluation deepen current-account deficits. In addition, while variations in external imbalances mainly result from exchange-rate misalignments in the euro area, they are mostly explained by output gaps for non-eurozone members. |
| Keywords: | global imbalances, current account, output gap, exchange-rate misalignments,panel VAR |
| JEL: | F32 F31 C33 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:drm:wpaper:2014-5&r=opm |