Three Essays on Economic Growth and Real Exchange Rate

Three Essays on Economic Growth and Real Exchange Rate PDF Author: Sung Jin Kang
Publisher:
ISBN:
Category : Developing countries
Languages : en
Pages : 428

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Three Essays on Economic Growth and Real Exchange Rate

Three Essays on Economic Growth and Real Exchange Rate PDF Author: Sung Jin Kang
Publisher:
ISBN:
Category : Developing countries
Languages : en
Pages : 428

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Real Exchange Rates and Foreign Assets

Real Exchange Rates and Foreign Assets PDF Author: Marcel Schroder
Publisher:
ISBN:
Category :
Languages : en
Pages : 0

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This thesis consists of three self-contained papers, which contribute to the debates surrounding global imbalances and financial globalization. The papers are unified by their featuring of foreign assets and real exchange rates (RERs) as the central themes. Following the introductory chapter, the first paper revisits the growth impact of RER distortions. The Washington Consensus emphasizes the economic costs of RER misalignment. However, a sizable recent empirical literature finds that undervalued RERs help countries achieve faster economic growth. The study shows that these findings are driven by inappropriate homogeneity assumptions imposed on long-run RER behavior across countries and/or misspecification of the growth equation. When these problems are redressed, the empirical results for a sample of 63 developing countries over the period 1970-2007 suggest that misalignment of the RER, in either direction from the level consistent with external and internal equilibrium reduces economic growth. However, deviations from Balassa-Samuelson adjusted purchasing power parity do not seem to affect growth. The RER should thus be consistent with external and internal balance, irrespective of the purchasing power parity benchmark. The second paper is motivated by the popular view that the surge in China's foreign exchange reserves is due to a distortionary exchange rate policy aimed at keeping the RER undervalued in order to support export-led growth. It undertakes an in-depth empirical investigation to quantify how much "mercantilist" and "precautionary" motives have contributed to the reserve build-up in China during the period 1998Q4-2011Q4. A substantial problem is that theory is consistent with employing two vastly differing approaches to defining and estimating the role of mercantilist reserve accumulation. A priori, either method could generate misleading results. The study shows, however, that the distinction between the two approaches is immaterial in China's case. The results suggest that mercantilism accounts for less than 10 percent of the reserve accumulation. Precautionary motives and other factors seem to be the dominant determinants of the surge in China's international reserves. The third paper studies the macroeconomic impact of valuation effects (changes in net external assets of a country arising from movements in exchange rates or asset returns). In theory, valuation effects are an important channel of international risk sharing through their facilitation of external adjustment. However, the effects can also be economically destabilizing in the presence of frictions in the international financial system. Despite the growing significance of valuation effects in an era of financial globalization, the nature and extent of their macroeconomic effect has not yet been systematically examined, especially in relation to emerging market economies (EMEs). The study examines the macroeconomic impact of valuation effects for 53 countries over 1980-2010. Valuation effects seem to operate as a risk sharing channel in high income countries. For EMEs the results depend on how valuation effects correlate with domestic consumption growth. There is weak evidence that valuation effects act as a risk sharing channel only if the correlation is negative, and are destabilizing otherwise. In the latter case, the welfare loss may well exceed one percent of permanent consumption.

Three Essays in International Economics

Three Essays in International Economics PDF Author: Maxwell Oteng
Publisher:
ISBN:
Category : Africa
Languages : en
Pages : 226

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Three Essays on Applied Macroeconomics

Three Essays on Applied Macroeconomics PDF Author: Hubert Scarlett
Publisher:
ISBN:
Category :
Languages : en
Pages : 0

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This thesis consists of three essays that are linked by thread of international economics. The first essay uses a panel vector autoregressive model to study the transmission of economic shocks from the United States (U.S.) to Caribbean economies. Unlike prior studies, this analysis includes remittance and tourism as additional channels of transmission. The results suggest that shutting down the remittance and tourism channels lower the effect of a U.S. economic shock on real GDP. Further, the inclusion of these two channels unearth measurement bias previously attributed to the traditional channels. As such, Caribbean governments should consider these two additional channels when designing countercyclical policies. The second essay investigates if evidence in favour of the J-curve phenomenon depends on a country's trading partner and, if there is any cross-country evidence of the J-curve. The assessment introduces asymmetric real exchange rate (RER) effects on bilateral trade balance, within an autoregressive distributed lag framework. Introducing asymmetric effects provide greater evidence supporting the J-curve relative to the linear framework, particularly in the annual assessment, where capturing delay in the J-curve is possible. The finding is consistent regardless of the measure of RER or trading partner considered. Unlike the quarterly panel analysis, support for the J-curve is evident in the annual panel but, specific to the country group and RER measure. The results have implications for designing bilateral trade policy if, exchange rate is considered a policy tool to improve trade balance over time. In the final essay, a panel of 45 Emerging Markets and Developing Economies is used to examine if remittances, foreign aid and institutions influence FDI's effect on economic growth. The results show that the positive effect of FDI on growth as well as on the growth of agriculture and manufacturing value added (VAD) diminishes as the level of institutions increases. The findings also indicate that higher remittances only enhance the marginal effect of FDI in the growth of agriculture VAD. Additionally, FDI's effect on the growth process is independent of foreign aid and should be treated as such.

Three Essays in International Economics

Three Essays in International Economics PDF Author: Ling Huang
Publisher:
ISBN:
Category :
Languages : en
Pages : 404

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Essays in International Money and Finance

Essays in International Money and Finance PDF Author: James R Lothian
Publisher: World Scientific
ISBN: 9813148314
Category : Business & Economics
Languages : en
Pages : 820

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Book Description
The aim of the book is to make the author's scholarly research in the areas of international finance and monetary economics easily accessible to other researchers and students. The articles included in the book span a wide range. The topics include the behavior of the three key relations in international finance, purchasing power parity, interest rate parity and real interest rate equality, the relation between money and other key economic variables, financial globalization and the transmission of economic disturbances internationally.

Three Essays on Regional Economic Integration and Exchange Rate Regimes

Three Essays on Regional Economic Integration and Exchange Rate Regimes PDF Author: Xiaodan Zhao
Publisher:
ISBN:
Category :
Languages : en
Pages :

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Three Essays on the Macroeconomic Effects of International Capital Flows

Three Essays on the Macroeconomic Effects of International Capital Flows PDF Author: Shibeshi Ghebre Kahsay
Publisher:
ISBN:
Category : Capital movements
Languages : en
Pages : 298

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Three Essays on Exchange Rate Policy and Economic Crisis Recovery in the Developing World

Three Essays on Exchange Rate Policy and Economic Crisis Recovery in the Developing World PDF Author: Ross James Hallren
Publisher:
ISBN:
Category : Currency boards
Languages : en
Pages : 224

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Shadows of History

Shadows of History PDF Author: Douglas L. Campbell
Publisher:
ISBN: 9781321210873
Category :
Languages : en
Pages :

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This dissertation is comprised of one essay focusing on the measurement of real exchange rate indexes, three chapters on the various impacts of real exchange rate movements on the economy, two essays on the impact of fixed exchange rate regimes on trade, one essay on the long-run impact of trade shocks, and a final chapter on the diffusion of technology along geographic lines. The common theme is that these essays collectively paint a picture of the world in which history casts surprisingly long shadows, as current economic relationships -- trade, employment, productivity, and output -- are the product of history. In the first essay, coauthored with Ju Hyun Pyun, we propose several new methods of computing real exchange rate indices which fix a subtle, but important, index numbers problem apparent in widely-used series created by the Federal Reserve and the IMF, and also control for productivity. Extending one of these indexes historically for the US back to 1820, we uncover a new empirical fact -- that in 2002, the US price level had been higher relative to trading partners than at any time since the worst year of the Great Depression. The next three chapters essay address the issue of the economic impact of RER movements. To identify a causal impact of RER movements on manufacturing, I compare the US experience in the early 2000s to the 1980s, when large US fiscal deficits led to a sharp appreciation in the dollar, and to Canada's experience in mid-2000s, when high oil prices and a falling US dollar led to an equally sharp appreciation of the Canadian dollar. I use disaggregated sectoral data and a difference-in-difference methodology, finding that an appreciation in relative unit labor costs for the lead to disproportionate declines in employment, productivity and output for both the US and Canada. In addition, I find that the impact of a temporary shock to real exchange rates is surprisingly long-lived. In the second of these chapters, I find scant evidence for an impact of adverse trade shocks on inquality in manufacturing, and in the third, I speculate that the collapse in manufacturing caused by tectonic shifts in relative prices are a likely cause of the "secular stagnation'' experienced in the US since 2000. In the fifth and sixth chapters I challenge previous literature which found that currency unions lead to dramatically larger trade flows. I found that this previous literature did not control for the fact that current trade relationships are the product of historical forces -- in this case, that countries with former colonial relationships experienced only a gradual decay of trade ties over time since independence. Adding in a dynamic control for country-pair specific trends in trade patterns, and omitting currency union changes brought on by major geopolitical events such as communist takeovers and ethnic cleansing episodes severely weakened the previous findings in the literature. In the seventh chapter, I look at the long-run impacts of temporary shocks to trade patterns from the world wars. I find, for example, that while UK manufacturers dominated world export markets before WWI, during the war US exporters rose to prominence, but that after the war the UK could then not regain the market share it had previously, even given the relative reduction of UK GDP. In the final chapter, with coauthor Ju Hyun Pyun, we challenge a previous seminal finding in the development literature which found that a country's ``genetic distance'' to the US predicts its per capita GDP, even while controlling for a whole host of other variables. We find, by contrast, that the apparent impact of genetic distance was not robust to the inclusion of two standard geographic controls -- distance from the equator and a dummy for sub-Saharan Africa.