Chinese Revaluation and Emerging Market Prospects

2010 ◽  
Vol 212 ◽  
pp. F15-F17
Keyword(s):  
Exchange Rate ◽  
Emerging Markets ◽  
Current Account ◽  
Global Economy ◽  
Emerging Market ◽  
Current Account Surplus ◽  
Developed Economies ◽  
Bric Countries ◽  
The Us ◽  
The Exchange Rate

While the financial crisis of 2008 caused deep recession in most of the world's developed economies, many of the largest emerging markets weathered the financial storm comparatively well. China remains a vital source of global demand, while India is also gaining an increasing weight in the global economy. China has differed from India and Brazil in that this growth has been associated with a significant current account surplus, and this has been a major issue, particularly in discussion with the US. The Russian current account surplus has been associated with its role as an oil producer. In this section we first compare economic performance prior to and during the financial turmoil among the so-called BRIC countries (Brazil, Russia, India and China) which constitute the world's largest emerging markets. We then discuss the Chinese current account surplus and policies that might be adopted to reduce it. These involve the expansion of demand in China, along with an appreciation of the exchange rate. However, there is no real long-term improvement of global imbalances if China just repegs the exchange rate at a higher level.

scholarly journals Dollars and Deficits - The US Current Account Deficit and its Exchange Rate Consequences

2005 ◽  
Vol 191 ◽  
pp. 31-36 ◽  
Author(s):  
Ali Al-Eyd ◽  
Ray Barrell ◽  
Olga Pomerantz
Keyword(s):  
Exchange Rate ◽  
Current Account ◽  
Current Account Deficit ◽  
Domestic Saving ◽  
Domestic Investment ◽  
The Past ◽  
Structural Capital ◽  
The Us ◽  
Exchange Rate Movements ◽  
The Exchange Rate

In the past three years the US dollar has been declining whilst the US current account deficit has expanded, and these two developments are clearly linked. However, the causes of the decline in the dollar and the solution to the US deficit may not be as closely related as at first may appear. The emergence of a sustained deficit does not automatically necessitate a fall in the exchange rate, and a fall in the exchange rate may not correct such a deficit. Deficits can exist if the currency moves above its sustainable real exchange rate, and a real depreciation can remove such a deficit. Deficits caused by exchange rate movements are likely to be more temporary than those that either emerge for long-term structural reasons or result from structural imbalances in the economy. A structural deficit can be the consequence of low domestic saving or high domestic government borrowing. If domestic investment is very profitable then even high levels of domestic saving may still result in a savings shortfall, and the high returns may induce a structural capital inflow which will produce a sustainable current account deficit as a consequence. All these factors have influenced the increase in the US deficit in the past decade, and it is difficult to see how a correction to the deficit can occur without one of the domestic drivers changing in some way. Here we present a set of simulations using NiGEM to examine the impacts of alternative adjustment scenarios and their global implications. Before adding to the debate about the possible remedies, we will attempt to establish the sources of the current conjuncture, as the alternative adjustment paths for deficits and for the dollar depend on the sources of misalignment.

Chapter II. The Home Economy

1978 ◽  
Vol 84 ◽  
pp. 22-34
Keyword(s):  
Exchange Rate ◽  
Current Account ◽  
The State ◽  
Recent Past ◽  
Current Account Surplus ◽  
State Of The Economy ◽  
The Exchange Rate ◽  
External Account

The state of the economy in 1977 was described in Chapter I. In the first quarter of this year, there have been two connected developments which have significantly altered the picture of the very recent past and the immediate future which we presented in the February Review. The first is that the current balance on external account in the first quarter is now estimated to have been in deficit by over £200 million compared with the surplus of some £500 million which we expected in February. This represented a massive deterioration—of nearly £600 million—from the last quarter of 1977. The second is that, probably in consequence, the exchange rate fell sharply during the quarter, and ended April (in IMF weighted terms) at 62.5, or roughly the level ruling before last autumn's sharp appreciation. In February, on the basis of the forecast current account surplus, we had expected the rate to appreciate a little further in early 1978.

scholarly journals Exchange Rate Volatility and Domestic Consumption: A Comparative Study of Developed, Developing and Emerging Economies

2019 ◽  
Vol 9 (3) ◽  
pp. 164
Author(s):  
Muhammad Zubair Chishti ◽  
Hafiz Syed Muhammad Azeem ◽  
Farrukh Mahmood ◽  
Adeel Ahmed Sheikh
Keyword(s):  
Exchange Rate ◽  
Panel Data ◽  
Developing Economies ◽  
Exchange Rate Volatility ◽  
Domestic Consumption ◽  
Aggregate Consumption ◽  
Developed Economies ◽  
Panel Data Estimation ◽  
The Exchange Rate ◽  
Data Estimation

The current study endeavors to explore the effects of oscillations in the exchange rate on the household aggregate consumption of developed, emerging, and developing economies, employing the panel data from 1995 to 2017. To select an appropriate panel data estimation technique, we apply Brush-Pagan & Hausman Tests for each set of chosen economies. Further, our study deduces that, in the case of developed economies, the oscillations in the exchange rate, significantly, affect the domestic consumption, supporting Alexander’s (1952) conjecture. However, in the case of emerging and developing economies, aggregate consumption does not respond to the exchange rate volatility.

Foreign Capital Inflow and Real Exchange Rate Appreciation in Developing Economies: Theory and Empirical Evidence

2014 ◽  
Vol 14 (03n04) ◽  
pp. 453-465
Author(s):  
Anindya Biswas ◽  
Biswajit Mandal ◽  
Nitesh Saha
Keyword(s):  
Exchange Rate ◽  
Global Economy ◽  
Foreign Capital ◽  
Factor Model ◽  
Developing Economies ◽  
Capital Inflow ◽  
Specific Factor ◽  
Export Sector ◽  
The Exchange Rate ◽  
Sectoral Composition

Foreign direct investment specially targeted to export sector is relatively new phenomenon in the global economy. Such inflow of foreign capital changes the sectoral composition of the economy, and it has some influence on the exchange rate of the destination country. In this study, we attempt to provide underlying theoretical and empirical explanations for exchange rate appreciation due to foreign capital inflow. We first use an extended three-sector specific factor model to explain analytically why and how an inflow of foreign capital boosts the price of a nontradable good that helps tilting the exchange rate in favor of the host country and then conduct an empirical analysis based on a panel dataset of 12 prominent developing countries over the time period 1980–2011 to substantiate our theoretical findings. We also strive to look at the possible consequences on factor prices and on sectoral de-composition of a representative economy.

Monetary Policy and Global Imbalances

2007 ◽  
Vol 199 ◽  
pp. 34-39 ◽  
Author(s):  
Ray Barrell ◽  
Ian Hurst
Keyword(s):  
Monetary Policy ◽  
Exchange Rate ◽  
Current Account ◽  
First Year ◽  
Sustained Improvement ◽  
J Curve ◽  
The Us ◽  
Curve Effect ◽  
Noticeable Improvement ◽  
The Current Account

The US current account imbalance has stayed stubbornly high despite the fall in the dollar that we have seen since the beginning of 2003. The exchange rate has fallen by around 15 per cent on average, mainly between the first quarter of 2003 and the first quarter of 2005. As we can see from figure 1, the fall has come in three steps, and each time it fell we might have expected an initial worsening of the current account for a year or so as prices change in advance of quantities (the J curve effect of the first year textbook). Hence we might have expected no sustained improvement until at least a year after the last downward step towards the end of 2004. However, as we can see from figure 2, there is no noticeable improvement in the current account during 2006, suggesting that domestic absorption was rising. At the same time inflation in the US was gradually drifting up under pressure from the weakening exchange rate.

What Explains Current Account Surplus in Korea?

2018 ◽  
Vol 17 (2) ◽  
pp. 70-93
Author(s):  
Chirok Han ◽  
Kwanho Shin
Keyword(s):  
Exchange Rate ◽  
Fiscal Policy ◽  
Current Account ◽  
Current Account Balance ◽  
Budget Deficits ◽  
Current Account Surplus ◽  
Short Run ◽  
The Right ◽  
The Impact ◽  
The Current Account

Since the currency crisis in 1998, Korea has experienced continuous current account surpluses. Recently, the current account surplus increased more rapidly—amounting to 7.7 percent of GDP in 2015. In this paper, we investigate the underlying reasons for the widening of Korea's current account surpluses. We find that the upward trend in Korea's current account surpluses is largely explained by its demographical changes. Other economic variables are only helpful when explaining short run fluctuations in current account balances. Moreover, we show that Korea's current account surplus is expected to disappear by 2042 as it becomes one of the most aged economies in the world. Demographic changes are so powerful that they explain, quite successfully, the current account balance trends of other economies with highly aged populations such as Japan, Germany, Italy, Finland, and Greece. When we add the real exchange rate as an additional explanatory variable, it is statistically significant with the right sign, but the magnitude explained by it is quite limited. For example, to reduce the current account surplus by 1 percentage point, a 12 percent depreciation is needed. If Korea's current exchange rate is undervalued 4 to 12 percent less than the level consistent with fundamentals, it is impossible to reduce Korea's current account surplus to a reasonable level by adjusting the exchange rate alone. Another way to reduce current account surplus is to expand fiscal policies. We find, however, that the impact of fiscal adjustments in reducing current account surplus is even more limited. According to our estimates, reducing the current account surplus by 1 percentage point requires an increase in budget deficits (as a ratio to GDP) of 5 to 6 percentage points. If we allow endogenous movements of exchange rate and fiscal policy, the impact of exchange rate adjustment increases by 1.6 times but that of fiscal policy decreases that it is no longer statistically significant.

scholarly journals Volatility Spillover of the Exchange Rate and the Global Economy on Iran Stock Market

2020 ◽  
Vol 15 (3) ◽  
pp. 343-356
Author(s):  
Ahmad Gholami ◽  
Ehsan Salimi Soderjani ◽  
◽  
Keyword(s):  
Exchange Rate ◽  
Stock Market ◽  
Global Economy ◽  
Volatility Spillover ◽  
The Exchange Rate
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