Globalization and Government Short-Term Room to Maneuver in Economic Policy: An Empirical Analysis of Reactions to Currency Crises

2009 ◽  
Vol 5 (1) ◽  
Author(s):  
Thomas Sattler ◽  
Stefanie Walter
Keyword(s):  
Currency Crises ◽  
Exchange Rate Policy ◽  
Economic Factors ◽  
Short Term ◽  
Policy Responses ◽  
Political Preferences ◽  
Popular View ◽  
Short Run ◽  
Rate Policy ◽  
National Governments

This article assesses the popular view that currency crises represent a prime example of the constraints that globalization imposes on government room to maneuver. We show that governments in fact have the possibility to respond to speculative pressure in different ways. Whether or not policymakers succumb to this pressure is not solely determined by economic factors but also a question of political considerations. Political preferences, institutions, and events significantly affect policy responses to currency crises. Our results suggest that national governments retain substantial short-run policy autonomy even in highly internationalized policy areas such as monetary and exchange rate policy.

The Upshot of Money Supply and Inflation in Nigeria

2017 ◽  
Vol 8 (2) ◽  
pp. 75-90
Author(s):  
Amassoma Ditimi ◽  
Keji Sunday ◽  
Onyedikachi O. Emma-Ebere
Keyword(s):  
Money Supply ◽  
Time Series Data ◽  
Dynamic Error ◽  
Exchange Rate Policy ◽  
Series Data ◽  
Infrastructure Development ◽  
State Of The Economy ◽  
Short Run ◽  
Rate Policy ◽  
The Government

Abstract This study empirically investigates the upshot of money supply on inflation in Nigeria using annual time series data spanning from 1970 to 2016. Co-integration and Autoregressive Dynamic Error Correction Model (ADLECM) approach was utilized. The results showed that money supply does not considerably influence inflation both in the long and short run possibly because the country is in recession. The ECM has the correct sign of negative and it is significant meaning that about 21% of the errors are corrected yearly. The Granger causality outcome demonstrates that, there is no causality between money supply and inflation in Nigeria within the study period and vice-versa. The implication of this is often that there are different economic conditions which are key determinant of inflation in Nigeria. The study recommends that the government should diversify the economy, minimize importation by encouraging local production of products and services. The CBN should guarantee an exchange rate policy that is essentially determined by the state of the economy and not by speculators being a net importation economy. Also, the CBN should look inwards into the current interest rate and see how it can be regulated in such a way that will encourage private and foreign investors to be able to invest in the country. This in turn, successively increases income, infrastructure development and economic growth at large.

Nigeria will struggle to make debt market policy work

2020 ◽  
Keyword(s):  
Exchange Rate Policy ◽  
Securities Market ◽  
Short Term ◽  
Policy Objective ◽  
Treasury Bills ◽  
High Interest Rate ◽  
Content Type ◽  
Rate Policy ◽  
Debt Market ◽  
Rate Environment

Subject Nigerian debt market. Significance A key Central Bank of Nigeria (CBN) strategy, focused on mopping up liquidity and attracting foreign exchange by selling high yielding, short-term securities, is at a turning point. While the policy succeeded for the most part, it came at a very high cost, with the ensuing high interest rate environment proving detrimental to the economy. With non-bank corporates and individuals restricted from purchasing CBN Bills, the securities market has essentially been split into two, with higher rates on CBN Bills and lower rates on Nigerian Treasury Bills. Impacts The divergence in rates between CBN Bills and Nigerian Treasury Bills will likely continue in the short term until restrictions are removed. Liquidity might flow to safe assets (such as the dollar), which could put the CBN’s fixed exchange rate policy objective at risk. A recent uptick in growth risks being undermined by global trade uncertainty surrounding the Wuhan Coronavirus and lowering demand for oil.

European Monetary Integration: From Bretton Woods to the Euro and Beyond

2016 ◽  
Author(s):  
Jeffry A. Frieden
Keyword(s):  
Exchange Rate ◽  
Gold Standard ◽  
Exchange Rate Policy ◽  
Monetary Integration ◽  
European Monetary ◽  
Political Conflicts ◽  
Rate Policy ◽  
The Common ◽  
Currency Policy ◽  
National Governments

This chapter analyzes the process of European monetary integration, focusing on the decades that led up to the creation of the common currency. This is because this period is one in which, as in the gold standard era, national governments had to decide on their currency policy, and, again as in the gold standard period, there were major domestic political conflicts over this choice. The battles over exchange rate policy in Europe since the early 1970s were at the center of the broader process of European integration. The eventual adoption of the euro was perhaps the crowning achievement of prointegration forces, and both the process and result reflect the central realities of contemporary Europe's political economy.

scholarly journals External Shocks, Trade Margins, and Macroeconomic Dynamics

Economies ◽  
2020 ◽  
Vol 8 (1) ◽  
pp. 6
Author(s):  
Stefano D’Addona ◽  
Lilia Cavallari
Keyword(s):  
Exchange Rate ◽  
Exchange Rate Regime ◽  
New Products ◽  
Firm Dynamics ◽  
Exchange Rate Policy ◽  
External Shocks ◽  
Macroeconomic Dynamics ◽  
Short Run ◽  
Rate Policy

This paper studies the role of the exchange rate regime for trade of new products. It first provides VAR evidence that a rise in external productivity shifts trade away from new products and more so in fixed regimes. Then, it presents a model with firm dynamics in line with this evidence. We argue that exchange rate policy can affect firms’ entry decisions with consequences for the competitiveness of a country’s exports well beyond the short run. In our setup, fixed exchange rates can foster the competitiveness of firms that trade new products, while flexible rates favor firms that produce mature products.

scholarly journals Financial Stability, the Trilemma, and International Reserves

2010 ◽  
Vol 2 (2) ◽  
pp. 57-94 ◽  
Author(s):  
Maurice Obstfeld ◽  
Jay C Shambaugh ◽  
Alan M Taylor
Keyword(s):  
Exchange Rate ◽  
Financial Stability ◽  
Foreign Currency ◽  
Exchange Rate Policy ◽  
International Reserves ◽  
Short Term ◽  
Financial Openness ◽  
Stability Model ◽  
Rate Policy ◽  
Modern Era

The rapid growth of international reserves, a development concentrated in the emerging markets, remains a puzzle. In this paper, we suggest that a model based on financial stability and financial openness goes far toward explaining reserve holdings in the modern era of globalized capital markets. The size of domestic financial liabilities that could potentially be converted into foreign currency (M2), financial openness, the ability to access foreign currency through debt markets, and exchange rate policy are all significant predictors of reserve stocks. Our empirical financial-stability model seems to outperform both traditional models and recent explanations based on external short-term debt. (JEL E23, E43, E44, F31, F32, F34)

scholarly journals Contagion: Does it really exist or is it simply pseudo systemic risk?

2003 ◽  
Vol 6 (3) ◽  
pp. 562-576
Author(s):  
Ashley G. Frank
Keyword(s):  
Exchange Rate ◽  
Financial Market ◽  
Systemic Risk ◽  
Currency Crises ◽  
Policy Issue ◽  
Spillover Effects ◽  
Exchange Rate Policy ◽  
Balance Sheets ◽  
Market Participants ◽  
Rate Policy

Financial market participants seem to have already accepted the phenomena of speculative currency attacks being temporarily correlated, with crises passing contagiously from one country to another. Yet doubt still exists about whether speculative attacks on a currency are due to its country's fundamentals or irrespective of them. More conservative economic opinion is that countries with deep mismanagement of national balance sheets and exchange rate policy as well as political irresponsibility, give rise to weaker external positions, from where they suffer higher negative spillover effects. Sadly, despite the possibility of contagious currency crises, being an important policy issue, this paper finds little support by way of systematic empirical analysis. So much so, that the choice is between opting to be a dissident, and, leaving the question unanswered. It chooses the latter.

Some Issues of Monetary and Exchange Rate Policy in Russia in 2000-2006 and in the Short-term Outlook

2007 ◽  
pp. 26-45 ◽  
Author(s):  
S. Drobyshevsky ◽  
P. Kadochnikov ◽  
S. Sinelnikov-Murylev
Keyword(s):  
Exchange Rate ◽  
Central Bank ◽  
Oil Prices ◽  
Macroeconomic Policy ◽  
Exchange Rate Policy ◽  
Economic Conditions ◽  
Short Term ◽  
Budgetary Policy ◽  
Rate Policy

The paper analyzes the problems of macroeconomic policy in Russia in 2000-2006. The authors estimate the trends of realization of monetary, credit, currency and budgetary policy under favorable and unfavorable external economic conditions. Different variants of government and central bank reaction to the oil prices conservation or decline are considered. Different scenarios of macroeconomic policy realization in 2007-2011 are modeled. The results of the computation are presented.

Currency crises and exchange rate policy

2013 ◽  
pp. 256-281
Author(s):  
Sjoerd Beugelsdijk ◽  
Steven Brakman ◽  
Harry Garretsen ◽  
Charles van Marrewijk
Keyword(s):  
Exchange Rate ◽  
Currency Crises ◽  
Exchange Rate Policy ◽  
Rate Policy

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.

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