Gustavo Adler - Academia.edu (original) (raw)

Papers by Gustavo Adler

Terms-of-Trade Cycles and External Adjustment1, Feb 13, 2017

We study the process of external adjustment to large terms-of-trade level shiftsidentified with a... more We study the process of external adjustment to large terms-of-trade level shiftsidentified with a Markov-switching approach-for a large set of countries during the period 1960-2015. We find that adjustment to these shocks is relatively fast. Current accounts experience, on average, a contemporaneous variation of only about ½ of the magnitude of the price shock-indicating a significant volume offset-and a full adjustment within 3-4 years. Dynamics are largely symmetric for terms-of-trade booms and busts, as well as for advanced and emerging market economies. External adjustment is driven primarily by offsetting shifts in domestic demand, as opposed to variations in output (also reflected in the response of import rather than export volumes), indicating a strong income channel at play. Exchange rate flexibility appears to have played an important buffering role during booms, but less so during busts; while international reserve holdings have been a key tool for smoothing the adjustment process.

Foreign Exchange Intervention : A Shield Against Appreciation Winds?, Jul 1, 2011

SSRN Electronic Journal, 2019

available exclusively online. To receive a free e-mail notification when quarterly issues are pos... more available exclusively online. To receive a free e-mail notification when quarterly issues are posted, please subscribe at www.imf.org/ external/cntpst. Readers may also access the Bulletin at any time at www.imf.org/ researchbulletin.

1 We are very grateful to Nicolás Eyzaguirre, Rodrigo Valdés, Charles Kramer and Luis Cubeddu for... more 1 We are very grateful to Nicolás Eyzaguirre, Rodrigo Valdés, Charles Kramer and Luis Cubeddu for their input and feedback. We also thank Camilo Tovar, Herman Kamil and seminar participants at the Central Banks of Colombia, Paraguay and Uruguay, and the IMF's Western Hemisphere Department for their useful comments, and Alejandro Carrión, Marola Castillo and Ben Sutton for their research assistance. A previous version of this work was published as Chapter 3 of the Fall 2011 Regional Economic Outlook-Western Hemisphere. This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate. Commodity-exporting countries have significantly benefited from the commodity price boom of recent years. At the current juncture, however, uncertain global economic prospects have raised questions about their vulnerability to a sharp fall in commodity prices and the policies that can shield it from such a shock. To address these questions, this paper takes a long term (4 decade) view at emerging markets' commodity dependence, the history of commodity price busts and the role of policies in mitigating or amplifying their economic impact. The paper highlights the stark difference in trends between Latin America-one of the most vulnerable regions given its high, and rising, commodity dependence-and emerging Asia-which has evolved from being a net exporter to a net importer of commodities in the last 40 years. We find evidence, however, that while commodity dependence is an important ingredient, a country's ultimate degree of vulnerability to commodity price shocks is to a great extent determined by the flexibility and quality of its policy framework. Policies in the run-up of sharp terms-of-trade drops-especially when those are preceded by booms-play a particularly important role. Limited exchange rate flexibility, a weak external position, and loose fiscal policy tend to amplify the negative effects of these shocks on domestic output. Financial dollarization also appears to act as a shock "amplifier."

En este articulo se examinan las practicas de intervencion de los mercados cambiarios y su eficac... more En este articulo se examinan las practicas de intervencion de los mercados cambiarios y su eficacia para contener la apreciacion de la moneda, usando una nueva base de datos cuantitativa y cualitativa para un panel de 15 economias desde 2004 hasta 2010, con un enfoque especial en America Latina. Cualitativamente, se examinan aspectos institucionales tales como los motivos declarados para intervenir, los instrumentos empleados, el uso de reglas frente a discrecion y el grado de transparencia. En terminos cuantitativos, se evalua la eficacia de las intervenciones esterilizadas para influir sobre el tipo de cambio usando un enfoque de panel de datos de dos etapas con variables instrumentales (VI), el cual ayuda a superar la tendencia a la endogeneidad. Los resultados sugieren que las intervenciones desaceleran el ritmo de apreciacion, pero los efectos disminuyen rapidamente con el grado de apertura financiera. Al mismo tiempo, las intervenciones son mas eficaces en el contexto de tipos...

The accumulation of large foreign asset positions by many central banks through sustained foreign... more The accumulation of large foreign asset positions by many central banks through sustained foreign exchange (FX) intervention has raised questions about its associated fiscal costs. This paper clarifies conceptual issues regarding how to measure these costs both from an ex-post and an ex-ante (relevant for decision making) perspective, and estimates both marginal and total costs for 73 countries over the period 2002-13. We find ex-ante marginal costs for the median emerging market economy (EME) in the inter-quartile range of 2-5.5 percent per year; while ex-ante total costs (of sustaining FX positions) in the range of 0.2-0.7 percent of GDP per year for light interveners and 0.3-1.2 percent of GDP per year for heavy interveners. These estimates indicate that fiscal costs of sustained FX intervention (via expanding central bank balance sheets) are not negligible.

We revisit the problem of finding a minimum enclosing ball with differential privacy: Given a set... more We revisit the problem of finding a minimum enclosing ball with differential privacy: Given a set of n points in the Euclidean space R d and an integer t ≤ n, the goal is to find a ball of the smallest radius r opt enclosing at least t input points. The problem is motivated by its various applications to differential privacy, including the sample and aggregate technique, private data exploration, and clustering [20, 21, 15]. Without privacy concerns, minimum enclosing ball has a polynomial time approximation scheme (PTAS), which computes a ball of radius almost r opt (the problem is NP-hard to solve exactly). In contrast, under differential privacy, until this work, only a O(√ log n)-approximation algorithm was known. We provide new constructions of differentially private algorithms for minimum enclosing ball achieving constant factor approximation to r opt both in the centralized model (where a trusted curator collects the sensitive information and analyzes it with differential privacy) and in the local model (where each respondent randomizes her answers to the data curator to protect her privacy). We demonstrate how to use our algorithms as a building block for approximating k-means in both models.

IMF Working Papers, 2013

We study the history of terms-of-trade booms (during 1970-2012), with a focus on Latin America, t... more We study the history of terms-of-trade booms (during 1970-2012), with a focus on Latin America, through the prisms of a simple metric that quantifies the associated income windfall. We also document saving patterns during these episodes and propose a measure of how much of the income windfall was saved. We find that Latin America's terms-oftrade shocks of the last decade have not differed much in magnitude from those observed during the 1970s, but that the associated windfall have been substantially larger. While aggregate saving increased more than in past episodes, the share of the windfall saved (the marginal saving rate) seems to be lower, suggesting that greater aggregate saving reflects mainly the sheer size of the windfall rather than a greater ‗effort' to save it. Finally, we find evidence that, while savings during the boom help to increase post-boom income, the composition of such savings matters. Specifically, in past episodes, savings allocated to foreign asset accumulation appear to have contributed more to post-boom income than those devoted to domestic investment.

Shocks stemming from Brazil—the large neighbor in South America—have historically been a source o... more Shocks stemming from Brazil—the large neighbor in South America—have historically been a source of concern for policy-makers in other countries of the region. This paper studies the importance of Brazil’s influence on its neighboring economies, documenting trade linkages over the last two decades and quantifying spillover effects in a Vector Auto Regression setting. While trade linkages with Brazil are significant for the Southern Cone countries (Argentina, Bolivia, Chile, Paraguay, and Uruguay), they are very weak for others. Consistent with this evidence, econometric results show that, while the Southern Cone economies (especially Mercosur’s members) are vulnerable to output shocks from Brazil, the rest of South America is not. Spillovers can take two different forms: the transmission of Brazil-specific shocks and the amplification of global shocks—through their impact on Brazil’s output. Finally, we also find suggestive evidence that depreciations of Brazil’s currency may not hav...

IMF Working Papers, 2016

We study the use of foreign exchange (FX) intervention as an additional policy instrument in an e... more We study the use of foreign exchange (FX) intervention as an additional policy instrument in an environment with learning, where agents infer the central bank policy rules from its policy actions. Under full information, a central bank focused on stabilizing output and inflation can achieve better outcomes by using FX intervention as an additional policy tool. Under policy uncertainty, where agents perceive that monetary policy may also have exchange rate stabilization goals, the use of FX intervention entails a trade-off, reducing output volatility while increasing inflation volatility. While having an additional policy tool is always beneficial, we find that the optimal magnitude of intervention is higher in monetary policy regimes with lower uncertainty. These results indicate that the benefits of using FX intervention as an additional stabilization tool are greater in regimes where monetary policy is credibly focused on output and inflation stabilization.

Many emerging market economies have relied on foreign exchange intervention (FXI) in response to ... more Many emerging market economies have relied on foreign exchange intervention (FXI) in response to gross capital inflows. In this paper, we study whether FXI has been an effective tool to dampen the effects of these inflows on the exchange rate. To deal with endogeneity issues, we look at the response of different countries to plausibly exogenous gross inflows, and explore the cross country variation of FXI and exchange rate responses. Consistent with the portfolio balance channel, we find that larger FXI leads to less exchange rate appreciation in response to gross inflows.

Staff Discussion Notes

The extensive use of the US dollar when firms set prices for international trade (dubbed dominant... more The extensive use of the US dollar when firms set prices for international trade (dubbed dominant currency pricing) and in their funding (dominant currency financing) has come to the forefront of policy debate, raising questions about how exchange rates work and the benefits of exchange rate flexibility. This Staff Discussion Note documents these features of international trade and finance and explores their implications for how exchange rates can help external rebalancing and buffer macroeconomic shocks.

Terms-of-Trade Cycles and External Adjustment1, Feb 13, 2017

We study the process of external adjustment to large terms-of-trade level shiftsidentified with a... more We study the process of external adjustment to large terms-of-trade level shiftsidentified with a Markov-switching approach-for a large set of countries during the period 1960-2015. We find that adjustment to these shocks is relatively fast. Current accounts experience, on average, a contemporaneous variation of only about ½ of the magnitude of the price shock-indicating a significant volume offset-and a full adjustment within 3-4 years. Dynamics are largely symmetric for terms-of-trade booms and busts, as well as for advanced and emerging market economies. External adjustment is driven primarily by offsetting shifts in domestic demand, as opposed to variations in output (also reflected in the response of import rather than export volumes), indicating a strong income channel at play. Exchange rate flexibility appears to have played an important buffering role during booms, but less so during busts; while international reserve holdings have been a key tool for smoothing the adjustment process.

Foreign Exchange Intervention : A Shield Against Appreciation Winds?, Jul 1, 2011

SSRN Electronic Journal, 2019

available exclusively online. To receive a free e-mail notification when quarterly issues are pos... more available exclusively online. To receive a free e-mail notification when quarterly issues are posted, please subscribe at www.imf.org/ external/cntpst. Readers may also access the Bulletin at any time at www.imf.org/ researchbulletin.

1 We are very grateful to Nicolás Eyzaguirre, Rodrigo Valdés, Charles Kramer and Luis Cubeddu for... more 1 We are very grateful to Nicolás Eyzaguirre, Rodrigo Valdés, Charles Kramer and Luis Cubeddu for their input and feedback. We also thank Camilo Tovar, Herman Kamil and seminar participants at the Central Banks of Colombia, Paraguay and Uruguay, and the IMF's Western Hemisphere Department for their useful comments, and Alejandro Carrión, Marola Castillo and Ben Sutton for their research assistance. A previous version of this work was published as Chapter 3 of the Fall 2011 Regional Economic Outlook-Western Hemisphere. This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate. Commodity-exporting countries have significantly benefited from the commodity price boom of recent years. At the current juncture, however, uncertain global economic prospects have raised questions about their vulnerability to a sharp fall in commodity prices and the policies that can shield it from such a shock. To address these questions, this paper takes a long term (4 decade) view at emerging markets' commodity dependence, the history of commodity price busts and the role of policies in mitigating or amplifying their economic impact. The paper highlights the stark difference in trends between Latin America-one of the most vulnerable regions given its high, and rising, commodity dependence-and emerging Asia-which has evolved from being a net exporter to a net importer of commodities in the last 40 years. We find evidence, however, that while commodity dependence is an important ingredient, a country's ultimate degree of vulnerability to commodity price shocks is to a great extent determined by the flexibility and quality of its policy framework. Policies in the run-up of sharp terms-of-trade drops-especially when those are preceded by booms-play a particularly important role. Limited exchange rate flexibility, a weak external position, and loose fiscal policy tend to amplify the negative effects of these shocks on domestic output. Financial dollarization also appears to act as a shock "amplifier."

En este articulo se examinan las practicas de intervencion de los mercados cambiarios y su eficac... more En este articulo se examinan las practicas de intervencion de los mercados cambiarios y su eficacia para contener la apreciacion de la moneda, usando una nueva base de datos cuantitativa y cualitativa para un panel de 15 economias desde 2004 hasta 2010, con un enfoque especial en America Latina. Cualitativamente, se examinan aspectos institucionales tales como los motivos declarados para intervenir, los instrumentos empleados, el uso de reglas frente a discrecion y el grado de transparencia. En terminos cuantitativos, se evalua la eficacia de las intervenciones esterilizadas para influir sobre el tipo de cambio usando un enfoque de panel de datos de dos etapas con variables instrumentales (VI), el cual ayuda a superar la tendencia a la endogeneidad. Los resultados sugieren que las intervenciones desaceleran el ritmo de apreciacion, pero los efectos disminuyen rapidamente con el grado de apertura financiera. Al mismo tiempo, las intervenciones son mas eficaces en el contexto de tipos...

The accumulation of large foreign asset positions by many central banks through sustained foreign... more The accumulation of large foreign asset positions by many central banks through sustained foreign exchange (FX) intervention has raised questions about its associated fiscal costs. This paper clarifies conceptual issues regarding how to measure these costs both from an ex-post and an ex-ante (relevant for decision making) perspective, and estimates both marginal and total costs for 73 countries over the period 2002-13. We find ex-ante marginal costs for the median emerging market economy (EME) in the inter-quartile range of 2-5.5 percent per year; while ex-ante total costs (of sustaining FX positions) in the range of 0.2-0.7 percent of GDP per year for light interveners and 0.3-1.2 percent of GDP per year for heavy interveners. These estimates indicate that fiscal costs of sustained FX intervention (via expanding central bank balance sheets) are not negligible.

We revisit the problem of finding a minimum enclosing ball with differential privacy: Given a set... more We revisit the problem of finding a minimum enclosing ball with differential privacy: Given a set of n points in the Euclidean space R d and an integer t ≤ n, the goal is to find a ball of the smallest radius r opt enclosing at least t input points. The problem is motivated by its various applications to differential privacy, including the sample and aggregate technique, private data exploration, and clustering [20, 21, 15]. Without privacy concerns, minimum enclosing ball has a polynomial time approximation scheme (PTAS), which computes a ball of radius almost r opt (the problem is NP-hard to solve exactly). In contrast, under differential privacy, until this work, only a O(√ log n)-approximation algorithm was known. We provide new constructions of differentially private algorithms for minimum enclosing ball achieving constant factor approximation to r opt both in the centralized model (where a trusted curator collects the sensitive information and analyzes it with differential privacy) and in the local model (where each respondent randomizes her answers to the data curator to protect her privacy). We demonstrate how to use our algorithms as a building block for approximating k-means in both models.

IMF Working Papers, 2013

We study the history of terms-of-trade booms (during 1970-2012), with a focus on Latin America, t... more We study the history of terms-of-trade booms (during 1970-2012), with a focus on Latin America, through the prisms of a simple metric that quantifies the associated income windfall. We also document saving patterns during these episodes and propose a measure of how much of the income windfall was saved. We find that Latin America's terms-oftrade shocks of the last decade have not differed much in magnitude from those observed during the 1970s, but that the associated windfall have been substantially larger. While aggregate saving increased more than in past episodes, the share of the windfall saved (the marginal saving rate) seems to be lower, suggesting that greater aggregate saving reflects mainly the sheer size of the windfall rather than a greater ‗effort' to save it. Finally, we find evidence that, while savings during the boom help to increase post-boom income, the composition of such savings matters. Specifically, in past episodes, savings allocated to foreign asset accumulation appear to have contributed more to post-boom income than those devoted to domestic investment.

Shocks stemming from Brazil—the large neighbor in South America—have historically been a source o... more Shocks stemming from Brazil—the large neighbor in South America—have historically been a source of concern for policy-makers in other countries of the region. This paper studies the importance of Brazil’s influence on its neighboring economies, documenting trade linkages over the last two decades and quantifying spillover effects in a Vector Auto Regression setting. While trade linkages with Brazil are significant for the Southern Cone countries (Argentina, Bolivia, Chile, Paraguay, and Uruguay), they are very weak for others. Consistent with this evidence, econometric results show that, while the Southern Cone economies (especially Mercosur’s members) are vulnerable to output shocks from Brazil, the rest of South America is not. Spillovers can take two different forms: the transmission of Brazil-specific shocks and the amplification of global shocks—through their impact on Brazil’s output. Finally, we also find suggestive evidence that depreciations of Brazil’s currency may not hav...

IMF Working Papers, 2016

We study the use of foreign exchange (FX) intervention as an additional policy instrument in an e... more We study the use of foreign exchange (FX) intervention as an additional policy instrument in an environment with learning, where agents infer the central bank policy rules from its policy actions. Under full information, a central bank focused on stabilizing output and inflation can achieve better outcomes by using FX intervention as an additional policy tool. Under policy uncertainty, where agents perceive that monetary policy may also have exchange rate stabilization goals, the use of FX intervention entails a trade-off, reducing output volatility while increasing inflation volatility. While having an additional policy tool is always beneficial, we find that the optimal magnitude of intervention is higher in monetary policy regimes with lower uncertainty. These results indicate that the benefits of using FX intervention as an additional stabilization tool are greater in regimes where monetary policy is credibly focused on output and inflation stabilization.

Many emerging market economies have relied on foreign exchange intervention (FXI) in response to ... more Many emerging market economies have relied on foreign exchange intervention (FXI) in response to gross capital inflows. In this paper, we study whether FXI has been an effective tool to dampen the effects of these inflows on the exchange rate. To deal with endogeneity issues, we look at the response of different countries to plausibly exogenous gross inflows, and explore the cross country variation of FXI and exchange rate responses. Consistent with the portfolio balance channel, we find that larger FXI leads to less exchange rate appreciation in response to gross inflows.

Staff Discussion Notes

The extensive use of the US dollar when firms set prices for international trade (dubbed dominant... more The extensive use of the US dollar when firms set prices for international trade (dubbed dominant currency pricing) and in their funding (dominant currency financing) has come to the forefront of policy debate, raising questions about how exchange rates work and the benefits of exchange rate flexibility. This Staff Discussion Note documents these features of international trade and finance and explores their implications for how exchange rates can help external rebalancing and buffer macroeconomic shocks.