A Survey on Exchange Rates Determination in the Teachings of the Austrian School

This survey represents a recollection of the contributions of prominent Austrian economists on the subject of the exchange rate determination (Mises, Hayek and Haberler). We review the theoretical fundaments that allow for a comprehensive understanding of the microeconomic forces that determine exchange rates. Then we examine the Purchasing Power Parity Theory, both from a neoclassical and Austrian viewpoint. Finally we inspect the international movements of money and the associations of these with the dynamics of the balance of payments and exchange rate. We leave open the door for future investigations over the idea of incorporating the notion of the Interest rates Parity, intended as a «tendency law», in the Austrian theory. Key words: Exchange rate, Austrian theory, purchasing power parity, balance of payments, international capital movements. Clasificación JEL: F31. Resumen: El presente ensayo representa una recopilación de las con-tribuciones de prominentes economistas austriacos sobre la de-terminación del tipo de cambio (Mises, Hayek, Haberler). En la pri-mera parte se repasan los fundamentos teoréticos que permiten una comprensión exhaustiva de las fuerzas microeconómicas que deter-minan el tipo de cambio. A continuación se examina la teoría de la paridad de poder adquisitivo, tanto desde un punto de vista austriaco como neoclásico. Finalmente se inspeccionan los movimientos inter-nacionales de dinero y las asociaciones de los mismos con las diná-micas de la balanza de pagos y del tipo de cambio. Se deja abierta la puerta para futuras investigaciones sobre la idea de incorporar la noción de la paridad de tipo de interés, entendida como «ley de ten-dencia», dentro de la teoría austriaca. Palabras clave: Tipo de cambio, análisis austriaco, paridad del poder adquisitivo, balanza de pagos, movimientos internacionales de capital.

Revisiting Feldstein–Horioka Puzzle: Evidence from SAARC Economies

In the macroeconomic perspective, domestic saving and investment constitute two important wheels that keep the growth process moving on towards stability. But when domestic savings tend to fly away to foreign countries for excess returns, the warranted domestic investment remains unattained thereby which impair the growth trend unless the gap is bridged by the foreign investment inflows. However, excess inflows of foreign investments may deteriorate current account balances, if not appropriately absorbed. In this pretext, this article revisited the Feldstein–Horioka puzzle with the twin-deficit hypothesis for SAARC countries. The results lend to support the validity of the twin-deficit hypothesis along with a low degree of association between domestic savings and investment in the region thereby justifying the argument that international capital movements or financial integration have increased in the post-reform era. This observation has significant policy implications for the sustained growth of the SAARC nations.

Yuan Internationalization: Status and Perspectives

The article provides information about renminbi internationalization stages, actions taken by Chinese authorities in this field as well as suggests possible ways for further increasing usage of the currency in international operations. The analysis is based on international currency criteria used by IMF and SWIFT and well as suggestions of Russian and foreign researchers. Launching the process of renminbi internationalization China was looking to achieve a number of economic and political goals. Usage on the national currency in international operations increases the country’s prestige in the world, facilitates international transaction for domestic economic actors and allows influencing foreign counterparts. China achieved significant success in internationalizing its national currency in the past decade. Yuan has been part of IMF reserve currencies for more than three years. However, the share of renminbi in global settlements and investments is still moderate and does not correspond to the size of the country’s economy. The USA maintains their dominant role in the world’s financial system and is not interested in allowing China to increase its global influence. China is inviting its key trading partners to create yuan based international transactions system as an alternative to the US dollar. Despite the scale of the economy, volume of foreign investments and size of the internal securities market – international participants show relatively low interest for renminbi usage. Comparison of the anticipated goals and actions taken and with the current outcomes allows suggesting conceding amendments to the strategy of increasing renminbi usage in the world. This can be achieved by removing restrictions for international capital movements and facilitating access to yuan liquidity and instruments for international participants.

Current Trends in the Dynamics of International Capital Flows

Global economic and financial crisis 2007–2009 had a devastating effect on international capital flows. An assessment of their dynamics over the past decade shows that in certain fields (for example, the volume of international debt securities circulating) the pre-crisis indicators were exceeded, in a number of areas they are close to the pre-crisis level (foreign direct investments, total capitalization of the world stock market), international bank lending remains significantly behind the pre-crisis values. In the leading world economies cross-border capital flows relative to GDP significantly decreased compared to 2007. Global imbalances between savings and investments continued to grow, though their structure by countries changed, and now developed countries play a key role in them. In the structure of international capital flows the main shift occurred from the other to portfolio investment, with a slight increase in the role of direct investment. The “quantitative easing” policy in the USA and euro zone has had a significant impact on international capital flows. With generally positive trends in international capital movements in 2017–2018, new threats to their developments are beginning to emerge, primarily in countries with emerging markets.

Neoliberal Policies and Globalization

This chapter shows that, while obstacles to international capital movements were removed in many countries, the obstacles in the way of international labor movements remained in place. At the same time, legal and technological changes weakened the labor unions and more generally the bargaining capacity of labor in many countries. As a result, the benefits of economic growth in the new era were distributed unequally between capital and labor. In addition, the Asian crisis at the end of the 1990s created difficulties for many developing countries and demonstrated the risks associated with financial globalization. Furthermore, the global economic crisis that began in 2008 led to a sharp decline in output followed by slow recovery in the developed countries.

The Effect of International Capital Movements on Financial Crisis and Banks

International Capital Movements the course of history has changed and improved until today and took its place in the evolving field of finance. In particular, The Industrial Revolution began with the rapid changes seen that right quickly spread from place to place in fluid funds. Globalization has accelerated the rapid development of technical and technological development. Specifically, after 1980, international capital mobility until it is able to confirm it. All the methods developed for removing most important part of the financial restructuring of the financial crisis, banks are minimizing financial risks. The aim of this study is to investigate whether International Capital Movements of the financial crisis and how it affects the works of bank. Banks have become the customers are responsible for implementing various methods to rid the financial crisis. The financial crisis in late 2008 to eliminate the problems that arise hedge to be removed from the market and the fund carries the responsibility with its own more efficient methods.