scholarly journals Financial flows and the New Developmentalism

2018 ◽  
Vol 38 (1) ◽  
pp. 115-124 ◽  
Author(s):  
Fernando J. Cardim de Carvalho
Keyword(s):  
Exchange Rate ◽  
Current Account ◽  
Manufacturing Firms ◽  
Balance Of Payments ◽  
Capital Account ◽  
Equilibrium Exchange Rate ◽  
Large Measure ◽  
Financial Flows ◽  
Equilibrium Exchange

ABSTRACT New Developmentalism has focused its attention on trade problems created, to a large measure, by the divergences between the exchange rate that keeps the current account of the balance of payments balanced and what it calls industrial equilibrium exchange rate, the rate that would preserve the competitiveness of manufacturing firms operating at the state-or-art frontier. ND acknowledges that these rates may be disturbed by financial flows, but the role of capital account movements may be underestimated. The paper argues that financial flows have indeed been underestimated, which may make more difficult to devise efficacious policies to correct the problem of currency overvaluation.

A Model of Balance of Payments Equilibrium Exchange Rate

2004 ◽  
Vol 42 (3) ◽  
pp. 5-22 ◽  
Author(s):  
MICHAL RUBASZEK
Keyword(s):  
Exchange Rate ◽  
Balance Of Payments ◽  
Equilibrium Exchange Rate ◽  
Equilibrium Exchange

scholarly journals EXCHANGE RATE - REGIMES AND POLICIES

2014 ◽  
Vol 1 (9) ◽  
pp. 97
Author(s):  
Novak Lučić
Keyword(s):  
Exchange Rate ◽  
Foreign Exchange ◽  
Foreign Exchange Market ◽  
Supply And Demand ◽  
Balance Of Payments ◽  
Direct Impact ◽  
Exchange Market ◽  
Equilibrium Exchange Rate ◽  
Equilibrium Exchange ◽  
Rate Policy

Exchange rate of one currency is theprice of the currency expressed in units of othercurrency. It is formed by the interaction of supply anddemand in the foreign exchange market. Given thatthe exchange rate has a direct impact on thecompetitiveness of a country in terms of features of itsexports and imports, in its balance of payments, andindirectly the overall economic and socialdevelopment, in addition to acting in marketprinciples - supply and demand in the formation ofthe equilibrium exchange rate, exchange rate issubject to different, stronger or weaker, more or less,forms of intervention. In the search for the optimalexchange rate policy of the national currency, themonetary authorities are positioned between the twoextremes - the complete abandonment of theexchange rate to the market laws of supply anddemand, or fixing the exchange rate for any of theselected anchor currency.

scholarly journals Role of Oil Prices in Exchange Rate Devaluation: Risks of the Russian Ruble and Other Currencies

2019 ◽  
Vol 16 (4) ◽  
pp. 76-81
Author(s):  
V. Yu. Didenko ◽  
N. I. Morozko ◽  
N. I. Morozko
Keyword(s):  
Monetary Policy ◽  
Exchange Rate ◽  
Foreign Exchange ◽  
Current Account ◽  
Foreign Exchange Market ◽  
Oil Prices ◽  
Balance Of Payments ◽  
Exchange Market ◽  
The Exchange Rate

Subject and topic. Currently, the decrease in payments on foreign debts and a decrease in imports have an impact on the demand in the foreign exchange market. As a result, a situation has arisen due to the actions of the Bank of Russia, caused by threats of sanctions that provoked the absence of excessive demand and adequate supply in the foreign exchange market and led to a decrease in ruble exchange rate fl uctuations due to oil price movements.The subject of research is to determine the role of oil prices in the formation of monetary policy, which can be a key driver of economic growth.Objective. Identifi cation of exchange rate management practices with the search for the relationship between the current account of the balance of payments and the volatility of the national currency exchange rate.Research methods, the main provisions. Methods used grouping, comparing and summarizing economic indicators to study the characteristics and trends of the monetary policy of China, South Korea and Latin American countries.A critical analysis of the various points of view of leading scientists on the negative or positive impact of the exchange rate on the development of the economy was carried out. At the same time, it is interesting to analyze the views of individual economists that the dependence of the ruble exchange rate on oil prices has recently largely decreased.The main results of the study. Determination of the theoretical relationship between the price of oil and the exchange rate, based on the shock component, either in oil prices or in the exchange rate, with testing the response of the economic variable to this shock.Main conclusions. It was concluded that in the conditions of the economic situation of the last decade, the main problem of export-oriented and import-oriented countries is the imbalance of the current account of the balance of payments, as well as its relationship, primarily with the prices of export goods.

Book Reviews

2009 ◽  
Vol 47 (1) ◽  
pp. 183-187
Keyword(s):  
Exchange Rate ◽  
Exchange Rate Policy ◽  
Capital Account ◽  
Equilibrium Exchange Rate ◽  
Princeton University ◽  
Equilibrium Exchange ◽  
Rate Policy ◽  
Key Issues ◽  
China’S Growth

Peter B. Kenen of Princeton University reviews “Debating China’s Exchange Rate Policy” by Morris Goldstein, Nicholas R. Lardy,. The EconLit Abstract of the reviewed work begins “Eight papers and fifteen comments, based on a conference held by the Peterson Institute for International Economics in October 2007, take stock of exchange rate policy in China and identify the major policy options going forward. Papers discuss China’s exchange rate policy--an overview of some key issues; monetary policy independence, the currency regime, and the capital account in China; rebalancing China’s growth; estimates of the equilibrium exchange rate of the renminbi--whether there is a consensus, and if not, why not; the management of China’s international reserves--China and a sovereign wealth fund scoreboard; the U.S. Congress and the Chinese renminbi; influence of the renminbi on exchange rate policies of other Asian currencies; and International Monetary Fund surveillance over China’s exchange rate policy. Goldstein is Dennis Weatherstone Senior Fellow, and Lardy is Senior Fellow, at the Peterson Institute. Index.”

Why the Capital Account Matters

1990 ◽  
Vol 131 ◽  
pp. 52-56 ◽  
Author(s):  
Nigel Pain ◽  
Peter Westaway
Keyword(s):  
Economic Policy ◽  
Exchange Rate ◽  
Current Account ◽  
Capital Markets ◽  
Trade Flows ◽  
Balance Of Payments ◽  
Capital Account ◽  
International Capital ◽  
The Current Account ◽  
Volume Of Trade

Most discussion of the balance of payments and its implications for exchange-rate prospects and economic policy falls into two distinct categories. Some authors focus on the current account alone while others argue that in a world of liberalised capital markets information from the volume of trade flows will simply be swamped by flows of highly mobile international capital. In this note we argue that both these viewpoints are too extreme; in aggregate both the current and capital accounts will matter.

Estimating the fundamental equilibrium exchange rate for the czech economy

1999 ◽  
Vol 8 (1) ◽  
Author(s):  
Kateřina Šmídková
Keyword(s):  
Exchange Rate ◽  
Exchange Rate Regime ◽  
Real Economy ◽  
Equilibrium Exchange Rate ◽  
Financial Flows ◽  
Equilibrium Exchange ◽  
The Exchange Rate ◽  
International Investors ◽  
Exchange Rate Band ◽  
Fundamental Equilibrium Exchange Rate

When currency turbulences hit the CZK in May 1997, the research presented in this paper had been nearly finished. It tried to contribute to the discussion of sustainability of external development of the Czech economy by comparing signals given by a set of indicators to signals implied by the estimates of fundamental equilibrium exchange rate (FEER) for the CZK.<p> Interestingly, the method of indicators did not give an unambiguous answer. Specifically, when applied to the Czech data, debt as well as solvency indicators did not imply a danger of external crisis. Financial indicators with a shorter-time horizon did send some warning signals. Indicators of competitiveness watched by large international investors considered the CZK to be overvalued since 1995.<p> In order to gain more decisive conclusion concerning the danger of external crisis, the structural approach was employed. The model simulations of the FEER indicated that the CZK became overvalued in 1996 with respect to the central parity of the exchange-rate band. This conclusion was quite robust taking into account behavior of both the real economy as well as decisive external financial flows. The Czech experience with currency turbulences provided an unintentional measure on how good the warning indicators were. The FEER methodology was able to conclude that there was a need for a policy shift in the end of 1996 although it did not give the clear warning that the exchange-rate regime itself was not sustainable.

Misalignment, Debt Accumulation and Fundamental Equilibrium Exchange Rates

1995 ◽  
Vol 153 ◽  
pp. 73-83 ◽  
Author(s):  
Michael J. Artis ◽  
Mark P. Taylor
Keyword(s):  
Exchange Rate ◽  
Exchange Rates ◽  
Current Account ◽  
Hysteresis Effect ◽  
Equilibrium Exchange Rate ◽  
Formal Expression ◽  
Debt Accumulation ◽  
Equilibrium Exchange ◽  
Rules Of Thumb ◽  
Fundamental Equilibrium Exchange Rate

This article deals with hysteresis in the fundamental equilibrium exchange rate (FEER) arising from misalignment. When the actual real exchange rate departs from its FEER value, current account realisations—and consequently, debt service obli gations—will differ from those assumed in the initial FEER calculation, necessitating its recomputation. The article derives a formal expression for this hysteresis effect in the FEER, and derives and applies rules of thumb for computing the hysteresis effect when considering the rate of approach of an exchange rate toward its FEER value.

The Role of the Current Account in Exchange-Rate Determination: A Comment on Rodriguez

1982 ◽  
Vol 90 (6) ◽  
pp. 1291-1294 ◽  
Author(s):  
Michael P. Dooley ◽  
Peter Isard
Keyword(s):  
Exchange Rate ◽  
Current Account ◽  
Exchange Rate Determination ◽  
The Current Account

Estimation of fiscal rule impact on Russian ruble equilibrium exchange rate

2021 ◽  
pp. 70-84
Author(s):  
D. A. Menshikh
Keyword(s):  
Exchange Rate ◽  
Foreign Exchange ◽  
Oil Price ◽  
Real Effective Exchange Rate ◽  
Alternative Methods ◽  
Equilibrium Exchange Rate ◽  
The Real ◽  
Equilibrium Exchange ◽  
Fiscal Rule ◽  
The Impact

This paper describes a new approach that makes it possible to assess the impact of foreign exchange interventions implemented under the fiscal rule on the Russian ruble equilibrium exchange rate. The essence of the approach is to quantify the impact of foreign exchange interventions carried out within the framework of the fiscal rule on the balance of supply and demand of foreign exchange, and to reflect this influence in macroeconomic models using the “effective” oil price indicator. The article describes in detail the calculation of this indicator. The advantage of using the “effective” oil price indicator compared to alternative methods lies in the efficiency (the ability to apply for monthly data), simplicity (the possibility of using for scenario forecasting of the exchange rate), as well as the flexibility of the method (the possibility of taking into account periods of suspension of the fiscal rule and deferred purchases). The current gap in the real effective exchange rate of Russian ruble was calculated based on the data for February 2008 — October 2019. The assessment of the contribution of the fiscal rule to the equilibrium value of the real exchange rate was about 2 pp., at the end of 2019 Russian ruble was overvalued.

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.

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