PRODUCTION NETWORKS AND THE OPEN MACROECONOMY

2008 ◽  
Vol 53 (03) ◽  
pp. 509-521 ◽  
Author(s):  
SVEN W. ARNDT
Keyword(s):  
Exchange Rate ◽  
Balance Of Payments ◽  
Policy Implications ◽  
Monetary Integration ◽  
Trade Integration ◽  
Production Networks ◽  
Cross Border ◽  
Production Sharing ◽  
Rapid Spread ◽  
Rate Behavior

A key feature of globalization in the current era has been the rapid spread of cross-border production sharing in many regions of the world, including Europe, North America and Asia. The effects of these developments in the context of regional trade integration have been examined in the recent literature. This paper looks at their implications for regional monetary integration and exchange-rate policies. Cross-border production networks and the intra-industry trade associated with them affect exchange-rate behavior, balance of payments adjustment, and the transmission of shocks and disturbances. This paper examines the policy implications of regional production networks that (i) are confined to the countries of a given region, and (ii) involve a dominant extra-regional economy.

scholarly journals What Drives Stops in Cross-Border Bond Flows?

2019 ◽  
Vol 11 (14) ◽  
pp. 3763
Author(s):  
Seung-Gwan Baek ◽  
Chi-Young Song
Keyword(s):  
Exchange Rate ◽  
Financial Markets ◽  
Emerging Economies ◽  
Exchange Rate Regimes ◽  
Real Exchange Rates ◽  
Flexible Exchange Rate ◽  
Regression Method ◽  
Policy Implications ◽  
Capital Account ◽  
Cross Border

This paper empirically explores the determinants of stop episodes driven by bond flows using quarterly data from 38 economies over the period 1995–2011. Drastic bond-led stop episodes may greatly destabilize domestic financial markets and lead to financial crisis, threatening the sustainability of the financial system. Using the complementary log–log regression method, we found that bond-led stop episodes were associated with contagion and domestic factors rather than global factors. The results of our estimation showed that the probability of bond-led stop episodes was higher in countries with larger financial markets or with more overvalued real exchange rates. The main policy implications of our results, particularly for emerging economies, are that bond-led stop episodes were less likely to occur in countries with higher levels of institutional quality, lower capital account restrictions, or more flexible exchange-rate regimes. Finally, we found that capital control played a relatively greater role in predicting bond-led stops in emerging economies than did exchange-rate regimes.

Exploring exchange rate based policy coordination in SADC

2016 ◽  
Vol 33 (4) ◽  
pp. 576-594 ◽  
Author(s):  
Mulatu Fekadu Zerihun ◽  
Martinus C. Breitenbach ◽  
Francis Kemegue
Keyword(s):  
Exchange Rate ◽  
Policy Coordination ◽  
Policy Implications ◽  
Real Effective Exchange Rate ◽  
Monetary Integration ◽  
Content Type ◽  
Structural Variables ◽  
Effective Exchange ◽  
The Exchange Rate ◽  
Effective Exchange Rate

Purpose This paper explores the possibilities for policy coordination in the Southern African Development Community (SADC) as well as real effective exchange rate (REER) stability as a prerequisite towards sensible monetary integration. The underlying hypothesis goes with the assertion that countries meeting optimum currency area conditions face more stable exchange rates. Design/methodology/approach The quantitative analysis encompasses 12 SADC member states over the period 1995-2012. Correlation matrixes, dynamic pooled mean group (PMG) and mean group (MG) estimators and real effective exchange rate (REER) and real exchange rate (RER) equilibrium and misalignment analysis are carried out to arrive at the conclusions. Findings The study finds that the structural variables used in the PMG model show that there are common fiscal and monetary policy variables that determine REER/RER in the region. However, the exchange rate equilibrium misalignment analysis reveals that SADC economies are characterised by persistent overvaluation at least in the short term. This calls for further sustained policy coordination in the region. Practical implications The findings in this paper have important policy implications for economic stability and for the attempt of policy coordination in SADC region for the proposed monetary integration to proceed. Originality/value This study is the first attempt that relates the exchange rate as a policy coordination instrument among SADC economies.

The Impossible Trinity» rule in the context of international experience

2019 ◽  
pp. 90-96
Author(s):  
M.P. Tskhovrebov ◽  
A.S. Tanasova
Keyword(s):  
Exchange Rate ◽  
Inflation Targeting ◽  
Empirical Studies ◽  
Theoretical Development ◽  
External Shocks ◽  
Cross Border ◽  
Relevant Today ◽  
Russian Economy ◽  
Monetary Authorities ◽  
Increased Sensitivity

The article is devoted to the «Trilemma» of the policy of the monetary authorities, or the «rule of impossible trinity». This policy compatibility rule, formulated more than 50 years ago, remains relevant today. Its reliability is generally confirmed by a number of empirical studies, although there are also suggestions on the need to adjust this economic and theoretical development. The corresponding discussion also affects the policy of the Bank of Russia (mega-regulator), which carries out inflation targeting in conditions of the free movement of cross-border capital and the use of a floating ruble exchange rate. Regarding the effectiveness of this policy, carried out in the presence of increased sensitivity of the Russian economy to external shocks, the authors express certain doubts.

Foreign Direct Investment

2017 ◽  
Author(s):  
Yilmaz Akyüz
Keyword(s):  
Foreign Direct Investment ◽  
Mergers And Acquisitions ◽  
Financial Markets ◽  
Foreign Exchange ◽  
Direct Investment ◽  
Balance Of Payments ◽  
Productive Capacity ◽  
Cross Border ◽  
Direct Contribution ◽  
High Profit

Recent years have also seen increased openness of EDEs to foreign direct investment (FDI) in search for faster growth and greater stability. However, FDI is one of the most ambiguous and least understood concepts in international economics. Common debate is confounded by several myths regarding its nature and impact. It is often portrayed as a stable, cross-border flow of capital that adds to productive capacity and meets foreign exchange shortfalls. However, the reality is far more complex. FDI does not always involve inflows of financial or real capital. Greenfield investment, unlike mergers and acquisitions, makes a direct contribution to productive capacity, but can crowd out domestic investors. FDI can induce significant instability in currency and financial markets. Its immediate contribution to balance-of-payments may be positive, but its longer-term impact is often negative because of high-profit remittances and import contents.

scholarly journals Global production networks and the evolution of industrial capabilities: does production sharing warp the product space?

2020 ◽  
Vol 72 (3) ◽  
pp. 731-747
Author(s):  
Russell Thomson ◽  
Prema-Chandra Athukorala
Keyword(s):  
Product Space ◽  
Industrial Structure ◽  
De Novo ◽  
Trade Openness ◽  
Production Networks ◽  
Global Production Networks ◽  
Industrial Upgrading ◽  
Data Set ◽  
Production Sharing ◽  
Space Approach

Abstract Do production capabilities of countries evolve from existing capabilities or emerge de novo? The Product Space approach developed by Hidalgo, Klinger, Barabási and Hausmann postulates that a country’s existing industrial structure largely determines its opportunities for industrial upgrading. However, this is difficult to reconcile with the export dynamism of many developing countries such as Thailand, Malaysia, Costa Rica and Vietnam that transformed from primary commodity dependence to exporters of dynamic manufactured products. In each of these cases, global production sharing facilitated industrial transition. In this article, we advance the Product Space approach to accommodate the role of global production sharing. Using a newly constructed multi-country data set of manufacturing exports that distinguishes between trade within global production networks and traditional horizontal trade, we find that that existing industrial structure has a smaller impact, but trade openness has a greater impact, on industrial upgrading within vertically integrated global industries.

Balance of Payments and Exchange Rate Systems

1974 ◽  
Vol 30 (4) ◽  
pp. 26-32
Author(s):  
Arthur B. Laffer
Keyword(s):  
Exchange Rate ◽  
Balance Of Payments
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