Macroeconomic Policies and Exchange Rate Matters

2021 ◽  
pp. 215-226
Author(s):  
Delphine Ducasse ◽  
Micheline B. Somda ◽  
David Pavot
Keyword(s):  
Exchange Rate ◽  
Macroeconomic Policies

Impact of external currency exposures on macroeconomic policies

2020 ◽  
pp. 23-40
Author(s):  
I. V. Prilepskiy
Keyword(s):  
Monetary Policy ◽  
Exchange Rate ◽  
Positive Impact ◽  
Exchange Rate Regime ◽  
Macroeconomic Policies ◽  
Panel Regressions ◽  
Financial Account ◽  
Currency Exposure ◽  
Cross Country ◽  
The Impact

Based on cross-country panel regressions, the paper analyzes the impact of external currency exposures on monetary policy, exchange rate regime and capital controls. It is determined that positive net external position (which, e.g., is the case for Russia) is associated with a higher degree of monetary policy autonomy, i.e. the national key interest rate is less responsive to Fed/ECB policy and exchange rate fluctuations. Therefore, the risks of cross-country synchronization of financial cycles are reduced, while central banks are able to place a larger emphasis on their price stability mandates. Significant positive impact of net external currency exposure on exchange rate flexibility and financial account liberalization is only found in the context of static models. This is probably due to the two-way links between incentives for external assets/liabilities accumulation and these macroeconomic policy tools.

scholarly journals Albania's Monetary Policy and the Basic Indicators that Effect the Economic Growth

2019 ◽  
Vol 2 (2) ◽  
pp. 51
Author(s):  
Bernard Balla
Keyword(s):  
Economic Growth ◽  
Monetary Policy ◽  
Exchange Rate ◽  
Interest Rates ◽  
Inflation Targeting ◽  
Inflation Rate ◽  
Full Employment ◽  
Price Stability ◽  
Macroeconomic Policies ◽  
Consumer Prices

Macroeconomic policies aim to stabilize the economy by achieving their goal of price stability, full employment and economic growth. Price stability is the responsibility of macroeconomic policies that are developed to maintain a low inflation rate, contribute to the solidity of the domestic product and maintain an exchange rate that can be predictable. The purpose of this paper is to analyze Albania's monetary policy by highlighting the main indicators that can be used as a measurement of the efficiency of this policy in the economic development. The literature review shows that there are many attitudes regarding the factors that need to be taken into consideration when analyzing monetary policies, including the elements of fiscal policies. In the Albanian economy, the prices and the level of inflation are the most important aspects. The Bank of Albania uses the inflation targeting regime, considering that the main indicator of inflationary pressures in the economy is the deviation of inflation forecasted in the medium term by its target level. In numerical terms, the bank intends to maintain its annual growth in consumer prices at the level of 3%. According to the latest reports published by the Bank of Albania in 2019, monetary policy continues to contribute positively to a financial environment with a low interest rate and an annual inflation rate of 2%. Although the inflation rate hit the lowest value of 1.8 % in 2018, a balanced rate was achieved through the reduction of interest rates and risk premiums in financial markets and, more recently, through the tightening of the exchange rate. These monetary conditions are appropriate to support the growth of domestic demand and the strengthening of inflationary pressures.

scholarly journals The More Divergent, the Better? Lessons on Trilemma Policies and Crises for Asia

2014 ◽  
Vol 31 (2) ◽  
pp. 21-54 ◽  
Author(s):  
Joshua Aizenman ◽  
Hiro Ito
Keyword(s):  
Exchange Rate ◽  
Market Economy ◽  
Latin American ◽  
Debt Crisis ◽  
Emerging Market ◽  
Asian Crisis ◽  
Macroeconomic Policies ◽  
Financial Openness ◽  
Crisis Period ◽  
Policy Choices

This paper investigates the potential impacts of the degree of divergence in open macroeconomic policies in the context of the trilemma hypothesis. Using an index that measures the extent of policy divergence among the three trilemma policy choices—monetary independence, exchange rate stability, and financial openness—we find that emerging market economies have adopted trilemma policy combinations with the smallest degree of policy divergence in the last 15 years. We then investigate whether and to what extent the degree of open macro policy convergence affects the probability of a crisis and find that a developing or emerging market economy with a higher degree of policy divergence is more likely to experience a currency or debt crisis. We also compare the development of trilemma policies around the crisis period for the groups of Latin American crisis countries in the 1980s and the Asian crisis countries in the 1990s. We find that Latin American crisis countries tended to close their capital accounts in the aftermath of a crisis, while that is not the case for the Asian crisis countries. The Asian crisis countries tended to reduce the degree of policy divergence in the aftermath of the crisis, which possibly meant they decided to adopt open macro policies that made their economies less prone to a crisis.

The persistence of moderate inflation in the czech republic and the czk crisis of may 1997

1999 ◽  
Vol 8 (4) ◽  
Author(s):  
Josef C. Brada ◽  
Ali M. Kutan
Keyword(s):  
Exchange Rate ◽  
Czech Republic ◽  
Exchange Rate Policy ◽  
Nominal Exchange Rate ◽  
Fiscal Policies ◽  
Foreign Reserves ◽  
Macroeconomic Policies ◽  
The Czech Republic ◽  
Speculative Attack ◽  
Rate Policy

The paper deals with the exchange rate policy being implemented in combination with the mix of monetary and fiscal measures prior to the speculative attack on the CZK in 1997. The fixed nominal exchange rate may have been retained for too long and the monetary and fiscal policies were inappropriate. It explains the relation between Czech inflation, exchange rate and macroeconomic policies until the crisis of May 1997. <P>While the Czech Republic weathered its currency crisis much better than did most other emerging economies, with the worst damage being a USD 2 billion loss of foreign reserves, the crisis failed to resolve all of the fundamental problems. It gives also some explanations for the persistence of inflation at a level around 10 % until mid-1998.

scholarly journals Market Efficiency and Long Run Purchasing Power Parity Disequilibria of the Mexican Peso Under Changing Exchange Rate Regimes

2004 ◽  
Author(s):  
Alejandra Cabello ◽  
Edgar Iván Ortiz ◽  
Robert I. Johnson
Keyword(s):  
Exchange Rate ◽  
Market Efficiency ◽  
Purchasing Power Parity ◽  
Inflation Targeting ◽  
Structural Changes ◽  
Exchange Rate Regimes ◽  
Purchasing Power ◽  
Power Parity ◽  
Macroeconomic Policies ◽  
Long Run

This paper tests if the efficient market version of Purchasing Power Parity (EMPPP) holds for the Mexican case for the 1970-2002 period in an environment of changing exchange rate regimes. Two regression analyses which extend PPP to a dynamic intertemporal model, based on market efficiency, are used, and in addition two unit root tests are applied. In general, the obtained empirical evidence does not support the EMPPP. Results suggest an inefficient market resulting from weak exchange rate policies and weak adoptions of several exchange rate regimes without proper inflation targeting and the application of strong and disciplined macroeconomic policies and structural changes.  

The Macroeconomic Management of Natural Resources

2018 ◽  
Author(s):  
Mark Henstridge ◽  
Alan Roe
Keyword(s):  
Decision Making ◽  
Exchange Rate ◽  
Direct Investment ◽  
Commodity Prices ◽  
Renewable Resource ◽  
Macroeconomic Policies ◽  
Resource Wealth ◽  
Natural Resource Wealth ◽  
Public Revenues ◽  
Macroeconomic Management

Managing natural resource wealth requires accommodating very large increases in investment, production, exports, and government revenues within the economy of the host country, and setting appropriate macroeconomic policies—especially fiscal, monetary, and exchange-rate policies—both to prevent resource wealth from destabilizing the economy and to ensure that its potential for economic development is maximized. This chapter focuses on the complexity of decision-making and policy on the unusual characteristics of the macroeconomic flows of the extractives sector: (i) foreign direct investment, production, exports, and revenues are often large; (ii) for each project there is a strong degree of uniformity in the sequence of activity from discovery through development to production; (iii) the non-renewable resource is finite, and so are the revenues; (iv) commodity prices are often volatile, hence public revenues can be also volatile.

International economic structures, government interests, and international coordination of macroeconomic adjustment policies

1991 ◽  
Vol 45 (3) ◽  
pp. 309-342 ◽  
Author(s):  
Michael C. Webb
Keyword(s):  
Exchange Rate ◽  
Interest Rates ◽  
Market Integration ◽  
Domestic Politics ◽  
Balance Of Payments ◽  
Fiscal Policies ◽  
Macroeconomic Policies ◽  
Macroeconomic Adjustment ◽  
Adjustment Policies ◽  
International Coordination

Analysts have commonly argued that there has been a decline in international coordination of the kinds of policies that governments can use to manage the international payments imbalances that emerge when different governments pursue different macroeconomic policies. The decline typically has been attributed to a posited decline in American hegemony. In contrast, this article argues that international coordination of macroeconomic adjustment policies (trade and capital controls, exchange rate policies, balance-of-payments financing, and monetary and fiscal policies) was at least as extensive for much of the 1980s as it had been in the 1960s. There was, however, a shift away from coordination of balance-of-payments financing and other policies that have limited direct consequences for domestic economic and political conditions and a concurrent shift toward coordination of monetary and fiscal policies that are critically important for domestic politics and economics. This change is best explained as a consequence of changes in the structure of the international economy. Most important, international capital market integration encouraged governments to coordinate monetary and fiscal policies because balance-of-payments financing and exchange rate coordination alone are insufficient to manage the enormous payments imbalances that emerge when capital is able to flow internationally in search of higher interest rates and appreciating currencies.

scholarly journals The Renminbi Exchange Rate Reform and Its Implications for Asian Markets

2016 ◽  
Vol 02 (04) ◽  
pp. 485-506 ◽  
Author(s):  
Takamoto Suzuki
Keyword(s):  
United States ◽  
Exchange Rate ◽  
Emerging Economies ◽  
The United States ◽  
Economic Policies ◽  
Macroeconomic Policies ◽  
Monetary Policies ◽  
Special Drawing ◽  
The Stability ◽  
The U.S

Up until now, the Renminbi (RMB) reform has been progressing gradually. With the RMB becoming a Special Drawing Right (SDR) component currency, China’s monetary policies will exert significant influence on the international marketplace. The year 2014 witnessed the weakening of the RMB against the U.S. dollar, yet thanks to China’s prudent economic policies, the RMB stopped depreciating further and remained quite stable for the first half of 2015, which benefited not only China itself, but also the United States, Japan, and other Asian economies. Asian markets used to be strongly influenced by the U.S. monetary policy and the performance of the U.S. dollar. However, since the RMB devaluation against U.S. dollar in the summer of 2015, Asian markets have been inclined to move in accordance with the market information from China rather than that from the United States. Although the RMB is not a currency like the euro that has been adopted by a number of countries, it can still exert great impacts on emerging economies in the world. For the RMB to take hold globally, improved fundamentals in emerging economies, an easing in the influence of the RMB-USD exchange rate, and a healthy financial system in China are all necessary. Meanwhile, both China and the United States need to enhance their coordination on macroeconomic policies and guarantee the stability of RMB-USD exchange rate.

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