China’s Escape from the Peripheral Condition: A Success Story?

2021 ◽  
pp. 048661342110354
Author(s):  
Francesco Macheda ◽  
Roberto Nadalini
Keyword(s):  
World Economy ◽  
Jel Classification ◽  
Exchange Rate Policy ◽  
Economic Data ◽  
Real Wages ◽  
Success Story ◽  
Technology Markets ◽  
Long Run ◽  
Rate Policy ◽  
Gain Access

This article explores the strategy of active interventions through which Chinese policymakers have created the conditions for pulling their country out of its peripheral status within the world economy. We find that the strategic use of exchange rate policy and the maintenance of extensive ownership in industrial assets by the national government have played a key role in cumulatively promoting the upgrading of technological capabilities of the national workforce since the mid-1990 onward. Economic data show support for the hypotheses of an increasing capacity of Chinese producers to gain access to oligopolistic technology markets. To the extent that this offers the opportunity to capture a slice of the technological rent hitherto reserved to the capitalist center, our study suggests that the growth of real wages in China will be consistent with the maintenance of the country’s external balance in the long run. JEL classification: L16, O47, J21, F13, B51

The real equilibrium exchange rate in a commodity­exporting economy: the experience of Azerbaijan

2021 ◽  
pp. 25-38
Author(s):  
Vusal Gasimli ◽  
Vusala Jafarova
Keyword(s):  
Exchange Rate ◽  
Real Exchange Rate ◽  
Oil Prices ◽  
Exchange Rate Policy ◽  
Current Account Balance ◽  
Equilibrium Exchange Rate ◽  
Long Run ◽  
Equilibrium Exchange ◽  
Rate Policy ◽  
Relative Productivity

The case of Azerbaijan serves to study the adequacy of exchange-rate policy in a resource-rich economy. This paper analyses the behavior of Azerbaijan’s external accounts over the past twenty years. Declining oil prices made an existing exchange-rate peg unsustainable and led to a large devaluation in 2015. Since then, the current account balance has improved, but by less than expected. We use the EBA-Lite method to derive regression-based estimates of the equilibrium real exchange rate, and relate misalignments to measures of “policy gaps”. Our findings suggest that only a few years after the devaluation, Azerbaijan’s currency has once more become overvalued. Moreover, the equilibrium real exchange rate is volatile and hardly compatible with a long-run exchange rate peg. Exchange rate policy should try to accommodate shifts in the fundamental determinants such as relative productivity and real oil prices.

scholarly journals The Danger of a “Geyser Disease” Effect: Structural Fragility of the Tourism-Led Recovery in Iceland

2019 ◽  
Vol 52 (1) ◽  
pp. 50-76
Author(s):  
Francesco Macheda ◽  
Roberto Nadalini
Keyword(s):  
Recovery Period ◽  
Jel Classification ◽  
Current Level ◽  
Rapid Expansion ◽  
Real Wages ◽  
Rapid Absorption ◽  
Long Run ◽  
Structural Fragility ◽  
Disease Effect ◽  
Economic Boom

The fall of the Icelandic economy in 2008 highlighted the destructive effects of unbridled markets. Yet, in recent years Iceland’s annual growth rates have been significantly higher than those of the overwhelming majority of advanced capitalist countries. The aim of this article is to delve into the fragile foundations that the current Icelandic economic boom rests on. We argue that the impressive appreciation of the Icelandic króna, triggered by the rapid expansion of tourism, has made the rapid absorption of unemployment compatible with price stability during the recovery period. By restricting sources of international competitiveness, however, this tourism-led recovery strategy will render the current level of unemployment and real wages inconsistent with internal and external equilibrium in the long run. JEL classification: E24, F31, J24, O33, B51

scholarly journals Macro-economic Policies and Energy Security—Implications for a Chronic Energy Deficit Country

2014 ◽  
Vol 53 (3) ◽  
pp. 255-273
Author(s):  
Inayat U. Mangla ◽  
Jamshed Y. Uppal
Keyword(s):  
Exchange Rate ◽  
Foreign Exchange ◽  
Energy Security ◽  
Capital Expenditure ◽  
Macroeconomic Policy ◽  
Volatile Oil ◽  
Jel Classification ◽  
Exchange Rate Policy ◽  
Energy Deficit ◽  
Rate Policy

The paper assesses the energy sector’s foreign exchange requirements for meeting energy consumption and for capital expenditures, and identifies its implications for the country’s macroeconomic policy and management. We develop a conceptual model for projecting the energy sector’s long-term requirements for foreign exchange. The model indicates that the country’s chronic dependence on oil imports is likely to expose the economy to high and volatile oil prices. A fundamental issue for Pakistan is how the energy projects requiring large inflows of foreign capital and technology will be financed. The main implication of our analysis is that there will be continuing pressure on the country’s foreign exchange resources. The demand for foreign exchange by the year 2024-25 is projected to be US$ 20-21 billion without the FDI in new power generation. However, when we include the requirements of foreign exchange for capital expenditure, the total FX requirements are in the range of US$ 23- 24 billion. An implication of the country’s chronic energy deficiency is that the macroeconomic policies, particularly the foreign exchange rate policy, need to be redefined to reflect the projected demands on hard currencies and their expected scarcity value. It is likely that Pakistan will remain dependent on foreign imports to meet its energy requirements for a long time and will need to generate commensurate foreign exchange resources to ensure longterm energy security. JEL classification: E66, F37, Q43 Keywords: Macroeconomic Policy, Exchange Rate Policy, Energy Security

scholarly journals Estimating Elasticity Function of Jordanian Aggregate Import Demand

2016 ◽  
Vol 4 (2) ◽  
pp. 33
Author(s):  
Mohamed Ibrahim Mugableh
Keyword(s):  
Demand Function ◽  
Policy Design ◽  
Exchange Rate Policy ◽  
Import Demand ◽  
Bounds Testing ◽  
Relative Prices ◽  
Long Run ◽  
Ardl Approach ◽  
Rate Policy ◽  
Bounds Testing Approach

This article estimates aggregate import demand function for Jordan using three fully co-integrating regressions over the (1980−2015) period. The bounds testing approach has been employed to test co-integration, while ARDL approach is used to analyze long-run elasticities. The results show a co-integration phenomenon among variables when import volume is dependent variable. In addition, the estimated long-run elasticities of import demand with respect to income and relative prices are 1.16 and -1.03, respectively. The understanding of import demand behavior is crucial for significant import forecasts, international trade planning, and exchange rate policy design.

scholarly journals Exchange Rate Management: The Case of Malaysia

2020 ◽  
Author(s):  
Yusuf Haji Othman ◽  
Goh Soo Khoon ◽  
Dawood M. Mithani
Keyword(s):  
Exchange Rate ◽  
Random Walk ◽  
Real Exchange Rate ◽  
Current Account ◽  
Government Spending ◽  
Policy Implication ◽  
Exchange Rate Policy ◽  
Current Account Balance ◽  
Long Run ◽  
Rate Policy

This paper sought to examine whether Purchasing Power Parity (PPP) can become a predictor model for exchange rate. We try to determine whether at least some variant of the PPP-oriented rule may be used in Malaysia as a basis for exchange rate policy. Two methods are used to examine whether longrun PPP holds. The first method is testing whether or not the real exchange rate follows a random walk. The second is the Johansen procedure to test for a long-run relationship between real exchange rate and real economic shocks. It is found that the ringgit real exchange rate follows a random walk, which means PPP does not hold. However, supportive evidence is also seen that there is a long-run relationship between ringgit real exchange rate with current account balance and government spending. The policy implication of this important finding is that some variant of the PPP-oriented rule may be used in Malaysia as a basis for exchange rate policy. Government spending and current account balance can be used as a guide to determine the movement of real exchange rate. The error-correction model shows that real exchange rate, government spending and current account all adjusted to long-run equilibrium. It has a very important policy implication. Fiscal policy, which controls government expenditure, can be used as a tool to manage exchange rate. Measures have to be taken to increase export while at the same time import has to be reduced to maintain the current account balance to be in surplus. This will strengthen the ringgit, thus helping to stabilize the ringgit exchange rate.

Fear of Free Floating or Forced Exchange Rate Fixing

2004 ◽  
pp. 112-122
Author(s):  
O. Osipova
Keyword(s):  
Exchange Rate ◽  
Financial Crisis ◽  
Exchange Rates ◽  
Inflation Targeting ◽  
Exchange Rate Policy ◽  
Float Exchange Rate ◽  
Floating Exchange Rate ◽  
Rate Policy ◽  
Exchange Rate Arrangements ◽  
Pass Through

After the financial crisis at the end of the 1990 s many countries rejected fixed exchange rate policy. However actually they failed to proceed to announced "independent float" exchange rate arrangement. This might be due to the "fear of floating" or an irreversible result of inflation targeting central bank policy. In the article advantages and drawbacks of fixed and floating exchange rate arrangements are systematized. Features of new returning to exchange rates stabilization and possible risks of such policy for Russia are considered. Special attention is paid to the issue of choice of a "target" currency composite which can minimize external inflation pass-through.

Strategy and Tactics of Monetary Policy during the World Economic Crisis

2010 ◽  
pp. 4-20 ◽  
Author(s):  
A. Nekipelov ◽  
M. Golovnin
Keyword(s):  
Monetary Policy ◽  
Economic Crisis ◽  
Exchange Rate Policy ◽  
Industrial Countries ◽  
Policy Goals ◽  
The World ◽  
Rate Policy ◽  
World Economic ◽  
World Economic Crisis ◽  
Qualitative Changes

The paper analyzes the qualitative changes in monetary policy goals and instruments during the world economic crisis of 2007-2009 in industrial countries and Russia; it represents the authors view on Russian monetary policy goals and results on different stages of crisis development. On the basis of the analysis the authors conclude on the necessity of active exchange rate policy in Russia, while developing interest rate instruments, and implementation of some exchange restrictions to prevent crisis contagion in the future.

Exchange Rate Regimes and Economic Stability

2010 ◽  
pp. 29-43
Author(s):  
S. Smirnov
Keyword(s):  
Exchange Rate ◽  
Inflation Targeting ◽  
Exchange Rate Regime ◽  
Exchange Rate Policy ◽  
Real Sector ◽  
Economic Stability ◽  
Exogenous Shocks ◽  
Floating Exchange Rate ◽  
Rate Policy ◽  
Managed Floating

The Bank of Russia intends to introduce inflation targeting policy and exchange rate free floating regime in three years. Exogenous shocks absorption which stabilizes the real sector of economy is usually considered to be one of the advantages of free floating exchange rate policy. However, our research based on the analysis of 25 world largest economies exchange rates and industrial production during the crisis of 2008-2009 does not confirm this hypothesis. The article also analyzes additional risks associated with free floating exchange rate regime in Russia and presents some arguments in favor of managed floating exchange rate regime.

On the Exchange Rate Policy

2010 ◽  
pp. 21-28
Author(s):  
K. Yudaeva
Keyword(s):  
Monetary Policy ◽  
Exchange Rate ◽  
Inflation Targeting ◽  
Exchange Rate Policy ◽  
Institutional Changes ◽  
Crisis Period ◽  
Local Currency ◽  
High Inflation ◽  
Rate Policy ◽  
The Exchange Rate

The level of trust in the local currency in Russia is very low largely because of relatively high inflation. As a result, Bank of Russia during crisis times can not afford monetary policy loosening and has to fight devaluation expectations. To change the situation in the post-crisis period Russia needs to live through a continuous period of low inflation. Modified inflation targeting can help achieve such a result. However, it should be amended with institutional changes, particularly development of hedging instruments.

The Role of Technological Change in the Long-run Global Economy Forecasting

2013 ◽  
pp. 97-116 ◽  
Author(s):  
A. Apokin
Keyword(s):  
Technological Change ◽  
Data Quality ◽  
Long Range ◽  
Global Economy ◽  
World Economy ◽  
Qualitative Approaches ◽  
Long Run ◽  
The World ◽  
National Economies

The author compares several quantitative and qualitative approaches to forecasting to find appropriate methods to incorporate technological change in long-range forecasts of the world economy. A?number of long-run forecasts (with horizons over 10 years) for the world economy and national economies is reviewed to outline advantages and drawbacks for different ways to account for technological change. Various approaches based on their sensitivity to data quality and robustness to model misspecifications are compared and recommendations are offered on the choice of appropriate technique in long-run forecasts of the world economy in the presence of technological change.

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