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on Open Economy Macroeconomics |
| By: | Thomas Grjebine; Jérôme Héricourt; Fabien Tripier |
| Abstract: | This paper investigates the role of sectoral reallocations in the divergence of productivity in Europe, based on a database for 33 sectors and 14 countries between 1995 and 2015. Using the contribution of sectoral productivity growth to Total Factor Productivity (TFP) at the country level, we highlight that variations in the relative size of sectors - less productive sectors growing relatively to more productive ones - have been at the origin of variable productivity losses in main European countries. Parallel to this divergence, European countries experienced heterogeneous real estate price dynamics, which took the form, in some economies, of massive boom-bust cycles. We investigate real estate shocks as a potential source of sectoral reallocations through a collateral mechanism. These shocks turn out to be a strong driver of productivity divergence between European countries. |
| Keywords: | Productivity;Sectoral Reallocations |
| JEL: | D22 F45 R30 |
| Date: | 2019–09 |
| URL: | http://d.repec.org/n?u=RePEc:cii:cepidt:2019-09&r=all |
| By: | Harald Finger; Pablo Lopez Murphy |
| Abstract: | This paper looks empirically at some economic effects of volatile exchange rates and financial conditions and examines policy responses for managing such volatility. It also sheds light on some economic costs that stem from volatile capital flows and exchange rates and analyzes how countries deploy their policy toolkits in response. The data-driven analysis should contribute to ongoing reflections about how to manage volatile capital flows and exchange rates both in Asian EMEs and more broadly. |
| Keywords: | Exchange rate policy;Real effective exchange rates;Balance of payments;Exchange markets;Balance of payments statistics;DPPP,capital flow,capital inflow,output gap,inflow,currency depreciation |
| Date: | 2019–10–23 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfdep:19/17&r=all |
| By: | Karel Br?na (University of Economics, Prague) |
| Abstract: | The submission contains formal and empirical analyses of the constraints on the supply of credit in open transition economies as the external solvency of the economy and the banking sector is ensured when their international investment position is negative, foreign owners have significant participation in domestic banks, and banks face increasing regulatory requirements under Basel III. Our objective is to define the factors that affect constraints on the supply of credit at both the macro and banking level and to quantify the relationship between international investment sustainability determinants and the sources of foreign funding in the economy/banking system using an unrestricted ARDL ECM model in the Czech Republic. |
| Keywords: | net foreign assets, credit supply, external solvency, Basel III |
| JEL: | F32 F34 E51 |
| Date: | 2019–10 |
| URL: | http://d.repec.org/n?u=RePEc:sek:iacpro:9412087&r=all |
| By: | Simplice A. Asongu (Yaoundé/Cameroon); Joseph Nnanna (The Development Bank of Nigeria, Abuja, Nigeria) |
| Abstract: | The EMU crisis holds special lessons for existing monetary unions. We assess the behavior of real effective exchange rates (REERs) of members of the Central African Economic and Monetary Community (CEMAC) zone with respect to their long-term equilibrium paths. A reduced form of the fundamental equilibrium exchange rate (FEER) model is estimated and associated misalignments. Our findings suggest that for majority of countries, macroeconomic fundamentals have the expected associations with the exchange rate fluctuations. The analysis also reveals that only the REER adjustments of Cameroon and Gabon are significant in restoring the long-term equilibrium in event of a shock. The Cameroonian economic fundamentals of terms of trade, government expenditure and openness have different long-term relations with the REER in comparison to those of other member states. There is no need for an adjustment in the level of the peg based on the present quantitative analysis of REER paths. |
| Keywords: | Exchange rate; Macroeconomic impact; CEMAC zone |
| JEL: | F31 F33 F42 F61 O55 |
| Date: | 2019–01 |
| URL: | http://d.repec.org/n?u=RePEc:exs:wpaper:19/071&r=all |
| By: | Antonia Lopez-Villavicencio; Valérie Mignon |
| Abstract: | This paper assesses whether the emergence of new trading partners (i.e., China and Eastern Europe) as suppliers reduces the exchange rate pass-through (ERPT) in Eurozone countries which differ regarding their external exposure. Using bilateral data on import prices at the two-digit sector level, we find that (i) pass-through is complete in many cases, (ii) ERPT from China is higher than from the United States, and (iii) there is no compelling evidence of a generalized link between ERPT and the increasing integration of some emerging markets in European imports. We also show that the launch of the single currency has not provoked a sufficient change in the part of trade exposed to exchange rate fluctuations and, therefore, has not affected the pass-through. Overall, the trend of liberalization in new players' markets has not altered the competitive environment such as to induce exporters of other countries to absorb exchange rate depreciations. |
| Keywords: | Exchange Rate Pass-through;Import Prices;China;Eastern Europe;Eurozone |
| JEL: | E31 F31 F4 C22 |
| Date: | 2019–06 |
| URL: | http://d.repec.org/n?u=RePEc:cii:cepidt:2019-08&r=all |
| By: | Vespignani, Joaquin (Tasmanian School of Business & Economics, University of Tasmania); Raghavan, Mala (Tasmanian School of Business & Economics, University of Tasmania); Majumder, Monoj Kumar (Tasmanian School of Business & Economics, University of Tasmania) |
| Abstract: | An important economic paradox that frequently arises in the economic literature is that countries with abundant natural resources are poor in terms of real gross domestic product per capita. This paradox, known as the ‘resource curse’, is contrary to the conventional intuition that natural resources help to improve economic growth and prosperity. Using panel data for 95 countries, this study revisits the resource curse paradox in terms of oil resources abundance for the period 1980–2017. In addition, the study examines the role of trade openness in influencing the relationship between oil abundance and economic growth. The study finds that trade openness is a possible avenue to reduce the resource curse. Trade openness allows countries to obtain competitive prices for their resources in the international market and access advanced technologies to extract resources more efficiently. Therefore, natural resource–rich economies can reduce the resource curse by opening themselves to international trade. |
| Keywords: | Oil rents, real GDP per capita, trade openness, dynamic panel data model |
| JEL: | E23 F13 Q43 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:tas:wpaper:31660&r=all |
| By: | Alessandro Cantelmo; Giovanni Melina; Chris Papageorgiou |
| Abstract: | Using a dynamic stochastic general equilibrium model, we study the channels through which natural disaster shocks affect macroeconomic outcomes and welfare in disaster-prone countries. We solve the model using Taylor projection, a solution method that is shown to deal effectively with high-impact weather shocks calibrated in accordance to empirical evidence. We find large and persistent effects of weather shocks that significantly impact the income convergence path of disaster-prone countries. Relative to non-disaster-prone countries, on average, these shocks cause a welfare loss equivalent to a permanent fall in consumption of 1.6 percent. Welfare gains to countries that self-finance investments in resilient public infrastructure are found to be negligible, and international aid has to be sizable to achieve significant welfare gains. In addition, it is more cost-effective for donors to contribute to the financing of resilience before the realization of disasters, rather than disbursing aid after their realization. |
| Date: | 2019–10–11 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:19/217&r=all |
| By: | Monoj Kumar Majumder; Mala Raghavan; Joaquin Vespignani |
| Abstract: | An important economic paradox that frequently arises in the economic literature is that countries with abundant natural resources are poor in terms of real gross domestic product per capita. This paradox, known as the ‘resource curse’, is contrary to the conventional intuition that natural resources help to improve economic growth and prosperity. Using panel data for 95 countries, this study revisits the resource curse paradox in terms of oil resources abundance for the period 1980–2017. In addition, the study examines the role of trade openness in influencing the relationship between oil abundance and economic growth. The study finds that trade openness is a possible avenue to reduce the resource curse. Trade openness allows countries to obtain competitive prices for their resources in the international market and access advanced technologies to extract resources more efficiently. Therefore, natural resource–rich economies can reduce the resource curse by opening themselves to international trade. |
| Keywords: | Oil rents, real GDP per capita, trade openness, dynamic panel data model |
| JEL: | E23 F13 Q43 |
| Date: | 2019–10 |
| URL: | http://d.repec.org/n?u=RePEc:een:camaaa:2019-78&r=all |
| By: | Frédérique Bec; Mélika Ben Salem (Université de Cergy-Pontoise, THEMA) |
| Abstract: | This paper develops an asymmetrical overshooting correction autoregressive model to capture excessive nominal exchange rate variation. It is based on the widely accepted perception that open economies might prefer under-evaluation to over-evaluation of their currency so as to foster their net exports. Our approach departs from existing works by allowing the strength of the overshooting correction mechanism to di er between over-depreciations and over-appreciations. It turns out that most of monthly e ective exchange rates for the G20 countries are in fact well characterized by an overshooting correction after an over-appreciation only. |
| Keywords: | nominal exchange rate, asymmetrical overshooting correction. |
| JEL: | C22 F31 F41 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:ema:worpap:2019-12&r=all |
| By: | Danilo Leiva-Leon (Banco de España); Eva Ortega (Banco de España); Jaime Martínez-Martín (European Central Bank) |
| Abstract: | This paper decomposes the time-varying effect of exogenous exchange rate shocks on euro area countries inflation into country-specific (idiosyncratic) and region-wide (common) components. To do so, we propose a flexible empirical framework that is based on dynamic factor models subject to drifting parameters and exogenous information. We show that exogenous shocks to the euro/USD account for over 50% of the nominal euro/USD exchange rate fluctuations in more than 1/3 of the quarters over the past six years – especially in turning points periods. Our main results indicate that headline inflation in euro area countries, and in particular its energy-related component, has significantly become more affected by these exogenous exchange rate shocks since the early 2010s, in particular, for the largest economies of the region. While such increasing sensitivity relies solely on a sustained surge in the degree of comovement for headline inflation, it is also based on a higher region-wide effect of the shocks for the case of energy inflation. Instead, purely exogenous exchange rate shocks do not seem to have a significant effect on the core component of headline inflation, which also displays a lower degree of comovement across euro area countries. |
| Keywords: | exchange rate, inflation, factor model, structural VAR model |
| JEL: | E31 F3 F41 |
| Date: | 2019–10 |
| URL: | http://d.repec.org/n?u=RePEc:bde:wpaper:1934&r=all |