Marcella Mulino - Academia.edu (original) (raw)

Papers by Marcella Mulino

Edward Elgar Publishing eBooks, Jul 30, 2009

Studies in Nonlinear Dynamics and Econometrics, Jan 12, 2012

The paper presents a monetary growth model for a small emerging economy with a currency board arr... more The paper presents a monetary growth model for a small emerging economy with a currency board arrangement. The integration into global financial markets determines an acceleration of debt-creating capital inflows that boosts growth and the prospect of future profits, and leads to the building-up of large imbalances in the public and private sectors. Financial fragility undermines the state of confidence and determines an endogenous capital reversal. At this stage, the strong commitment to maintain the peg leaves no room for stabilization purposes and leads to systemic instability. We run a continuous-time estimation of the non-linear differential equations system of the model, with reference to Argentina during the years of the currency-board arrangement. We find two steady-state solutions, corresponding to a high-interest rate and a low-interest rate equilibrium, respectively. The local stability and sensitivity analysis show that both equilibria are unstable and that the system is intrinsically fragile. We show that even a tighter fiscal policy, according to the prescriptions of international institutions, results ineffective in improving stability. * The authors wish to thank C. R. Wymer for suggestions and helpful comments on the empirical analysis. We also wish to thank participants to the Conference in Honor of Giancarlo Gandolfo, Rome September 2010, where a preliminary version of the paper was presented. Maggi B. and Cavallaro E. wish to thank for financial support from "Ricerca di Università (ex Ateneo) anno 2007-prot. C26A07ZJJ2."

Economic Modelling, Sep 1, 2011

The paper presents an open-economy macrodynamical growth model with the aim of giving an endogeno... more The paper presents an open-economy macrodynamical growth model with the aim of giving an endogenous characterisation to the process that leads a small country with a currency-board arrangement to accumulate dangerously high levels of external debt and become vulnerable to macroeconomic instability. The macrodynamics of the model results from the combination of the commitment to maintain the pegthat makes liquidity closely dependent on the dynamics of foreign reservesand the non-linear real and financial interactions that drives the pro-cyclical behaviour of the economy. Within this context, the external financing ease during an economic upswing leads to debt-supported growth and financial fragility; the consequent deterioration of profitability expectations brings about a capital reversal that, in the absence of monetary stabilisation tools, makes the currency arrangement unsustainable. A financial crisis may thus turn into a currency crisis. We run a continuous-time estimation of a non-linear differential equations system for Argentina during the years of the currency-board arrangement. We find that two steady-state solutions exist. The local stability and sensitivity analysis show that both equilibria are unstable and that the qualitative nature of the equilibria depends in particular on lenders' responsiveness to the degree of leverage. We also show that relaxing the assumption on the currency arrangement and allowing for an autonomous monetary policy makes both equilibria stable.

RePEc: Research Papers in Economics, Feb 1, 2002

Following both the balance-sheet approach to currency crises and the financial fragility literatu... more Following both the balance-sheet approach to currency crises and the financial fragility literature, the paper presents an open economy macrodynamical monetary growth model with the aim of giving an endogenous characterisation to the process that, over time, leads an emerging economy to accumulate dangerously high levels of debt and to be vulnerable to macroeconomic instability. The model explores the nonlinear real and financial interaction at work, with the endogenously generated liquidity feeding back dynamically to firms' investment, the level of output, the interest rate and the expected rate of return. The paper shows that the system may display instability if lenders and borrowers are not too concerned with firms' degree of leverage, profitability expectations do not take adequately into account firms' financial structure, and destabilising feedback mechanisms dominate, which go from debt accumulation and profitability expectations onto the rate of profit and the interest rate. As a result, the economy may incur in excessive foreign borrowing. The consequent worsening in firms' balance sheets may turn into financial fragility, and over time bring about a fall in external lending. A prolonged recession may thus follow, possibly calling into question the currency arrangements; hence, a financial crisis may turn into a currency crisis.

RePEc: Research Papers in Economics, 2010

The paper presents an open-economy macrodynamical growth model with the aim of giving an endogeno... more The paper presents an open-economy macrodynamical growth model with the aim of giving an endogenous characterisation to the process that leads a small country with a currency-board arrangement to accumulate dangerously high levels of external debt and become vulnerable to macroeconomic instability. The macrodynamics of the model results from the combination of the commitment to maintain the peg-that makes liquidity closely dependent on the dynamics of foreign reservesand the non-linear real and financial interactions that drives the pro-cyclical behaviour of the economy. Within this context, the external finance ease during an economic upswing leads to debt-supported growth and financial fragility; the consequent deterioration of profitability expectations brings about a capital reversal that, in the absence of monetary stabilization tools, makes the currency arrangement unsustainable. A financial crisis may thus turn into a currency crisis. We run a continuous-time estimation of a non-linear differential equations system for Argentina during the years of the currency-board arrangement. We find that two steady-state solutions exist. The local stability and sensitivity analysis show that both equilibria are unstable and that the qualitative nature of the equilibria depends in particular on lenders' responsiveness to the degree of leverage. On the contrary, when considering a different currency arrangement with an autonomous monetary policy, the system becomes stable.

RePEc: Research Papers in Economics, Mar 1, 2007

We analyze the role of vertical innovation in trade patterns for developing economies trading wit... more We analyze the role of vertical innovation in trade patterns for developing economies trading with technologically advanced countries. A model is presented where the international diffusion of knowledge, promoted by economic integration, is the source of a technological catching up and leads to a convergence in the quality of traded goods, with a positive effect on exports. We then turn our attention on the evolution of trade between the Central and Eastern European countries (CEECs-5) and their European Union partner countries, assessing whether economic integration has increase the quality of the goods produced. For the period 1995-2005, we find evidence of the increasing role of intra-industry trade and vertical differentiation and a process of specialization in higher quality products, especially in the medium-and high-skill sectors.

Emerging Markets Finance and Trade, Nov 1, 2013

International Advances in Economic Research, Jul 24, 2008

RePEc: Research Papers in Economics, Dec 1, 2008

We consider a technologically backward country and analyse the implications on competitiveness an... more We consider a technologically backward country and analyse the implications on competitiveness and long-run growth of the quality content of traded goods. We build an endogenous growth model where quality improvements stem from research activity taking place in the R&D sector, and where the relative quality content of goods matter for export and import demand functions. We show that the possibility of an optimal growth with a balanced current account and no adverse terms-of-trade effects is closely related to the evolution of the country's technological distance with respect to the trade partner: with an unfavourable quality-dynamics the country cannot engage successfully in "non-price" competition. Thus, long-run growth is coupled with an adverse export to import ratio, and a balanced trade requires a continuous offsetting fall in relative prices, either through devaluations or wage deflations. We then allow for international knowledge spillovers that increase the productivity of labour resources devoted to research in a way which is proportional to the technological distance between the countries. We show that the greater the country's ability to absorb foreign knowledge and improve upon foreign technologies, the greater the gains in competitiveness, and the benefits to long-run growth. A numerical simulation confirms our findings.

Integration and Globalization

Italian economic journal, Apr 17, 2023

The macrodynamics of external debt and financial fragility in a currency board: the case of Argen... more The macrodynamics of external debt and financial fragility in a currency board: the case of Argentina

All in-text references underlined in blue are linked to publications on ResearchGate, letting you... more All in-text references underlined in blue are linked to publications on ResearchGate, letting you access and read them immediately.

Throughout the second half of the 1990s, conventional indicators of bank fundamentals depicted th... more Throughout the second half of the 1990s, conventional indicators of bank fundamentals depicted the Argentine banking system as potentially resistant to liquidity and solvency shocks. Against this background, in 2001 the Argentine banking system experienced a massive run on deposits that culminated in the disruption of the payment system. We argue that the drawbacks of the currency board regime have been at the roots of this crisis. The dollarization of the economy, the huge overvaluation of the real exchange rate and the exposure to Government debt, all contributed to the building up of the banks’ critical vulnerabilities. The lack of monetary and exchange-rate tools made it difficult to address the recession of the last years of the 1990s and triggered a collapse of confidence in the sustainability of the public debt and the currency board itself. In such a context, the banks’ vulnerabilities became explicit so that the collapse of confidence affected the banking system, becoming t...

Atlantic Economic Journal, 2002

The paper addresses the problem of deÞning and assessing the scale of capital ßight from Russia a... more The paper addresses the problem of deÞning and assessing the scale of capital ßight from Russia and of brießy reviewing the channels through which capital, both of legal and illegal origin, illegally leaves Russia. It then highlights the determinants of Russian capital ßight, as the traditional view of a reaction to divergences among real domestic and foreign returns and to economic and political risks proves inadequate. More important factors are linked to speciÞc features of the transition process under way, that is macroeconomic instability and variability of government policies, weak protection of property rights and savings, a fragile banking system limiting access to investment Þnance, high and unevenly enforced taxes, a large share of unofficial activities, and considerable levels of corruption. (JEL F32); Atlantic Econ. J., 30(2): pp. 150-171, Jun. 02. c°A ll Rights Reserved

Emerging Markets Finance and Trade, 2013

In the paper we focus on emerging market economies' pattern of trade, with a view to explaining t... more In the paper we focus on emerging market economies' pattern of trade, with a view to explaining the different features of competitiveness for high skill-and low skill-intensive firms. We consider a theoretical dynamical setup where high-skill firms engage in innovation activity and gain market shares in high-income "quality dominated" markets thanks to technological catching up, whereas low-skill firms face price competition for their exports. On the basis of the theoretical model, we run econometric estimations for trade between CEECs and EU economies over the period 2000-2007. In the econometric analysis we first test the assumption that UVR is an adequate indicator of quality in trade, showing that in high skill-intensive firms it is systematically correlated to domestic and foreign technological variables; we then use the fitted UVR in the estimation of the role of preference for quality in the evolution of CEECs' market shares. The estimations support the results of the theoretical model as to the role of non-price competitiveness stemming from quality-supply as well as quality-demand factors.

We consider a technologically backward country with persistent external imbalances and analyse th... more We consider a technologically backward country with persistent external imbalances and analyse the role of traded goods ’ relative quality content for competitiveness and growth. We build a model where a technological catching up process is driven by international knowledge spillovers and facilitated by the integration of markets. We derive analytically the impact of such a process on export and import demand functions. We find that the greater the country’s ability to absorb foreign knowledge and improve upon foreign technologies, the greater its gain in competitiveness, and in the long-run growth rate of income. A numerical simulation confirms our findings.

In the paper we focus on the vertical dimension of product differentiation for emerging market ec... more In the paper we focus on the vertical dimension of product differentiation for emerging market economies, in order to explain the “within specialization”, i.e., in high quality, high skill-intensive products or in low quality, low skill-intensive products. Exporting firms are distinguished by their pace of innovation: high-tech firms produce advanced goods, thanks to basic research activity, whereas low-tech firms manufacture traditional products. The international diffusion of knowledge speeds up the intensity of quality upgrading in high-tech industries that are able to compete in ”quality dominated markets ” and expand along the “intensive margin”; on the other hand, traditional firms step up the quality ladder with secondary innovations, and expand thanks to a traditional cost competition. We derive analytically export demand for products of the advanced and traditional industries assuming both a horizontal and a quality dimension in households ’ preferences, so that export pene...

Edward Elgar Publishing eBooks, Jul 30, 2009

Studies in Nonlinear Dynamics and Econometrics, Jan 12, 2012

Economic Modelling, Sep 1, 2011

RePEc: Research Papers in Economics, Feb 1, 2002

RePEc: Research Papers in Economics, 2010

The paper presents an open-economy macrodynamical growth model with the aim of giving an endogeno... more The paper presents an open-economy macrodynamical growth model with the aim of giving an endogenous characterisation to the process that leads a small country with a currency-board arrangement to accumulate dangerously high levels of external debt and become vulnerable to macroeconomic instability. The macrodynamics of the model results from the combination of the commitment to maintain the peg-that makes liquidity closely dependent on the dynamics of foreign reservesand the non-linear real and financial interactions that drives the pro-cyclical behaviour of the economy. Within this context, the external finance ease during an economic upswing leads to debt-supported growth and financial fragility; the consequent deterioration of profitability expectations brings about a capital reversal that, in the absence of monetary stabilization tools, makes the currency arrangement unsustainable. A financial crisis may thus turn into a currency crisis. We run a continuous-time estimation of a non-linear differential equations system for Argentina during the years of the currency-board arrangement. We find that two steady-state solutions exist. The local stability and sensitivity analysis show that both equilibria are unstable and that the qualitative nature of the equilibria depends in particular on lenders' responsiveness to the degree of leverage. On the contrary, when considering a different currency arrangement with an autonomous monetary policy, the system becomes stable.

RePEc: Research Papers in Economics, Mar 1, 2007

Emerging Markets Finance and Trade, Nov 1, 2013

International Advances in Economic Research, Jul 24, 2008

RePEc: Research Papers in Economics, Dec 1, 2008

Integration and Globalization

Italian economic journal, Apr 17, 2023

Atlantic Economic Journal, 2002

Emerging Markets Finance and Trade, 2013