Global Imbalances (original) (raw)
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Emerging Markets Review, 2012
We analyze, in a unified theoretical framework, the two main models for equilibrium exchange rate, namely, the BEER and the FEER approaches. In order to understand the interactions between them, we study in detail the temporal links between these two measures. Our results show that, in average, the BEER and the FEER are closely related. Yet, important differences can be observed for some countries and/or some periods of time. Therefore, we analyze some of the factors that may explain this disconnection, identifying several aspects which are able to alter the relation between the current account and the real effective exchange rate, and so, between the FEER and the BEER. Our analysis puts forward the structural changes in matter of competitiveness, the dynamics of foreign asset positions and valuation effects as explanations for the divergence.
Exchange Rate Misalignments and World Imbalances
SSRN Electronic Journal, 2010
Since the mid-1990s, the world imbalances have increased significantly with a large US current deficit facing Asian surpluses, mainly Chinese. Since 2007, a partial reduction of these imbalances has been obtained, largely thanks to production's decreases, without large exchange rate adjustments. The Asian surpluses have remained important. The objective of this paper is to examine the exchange rate misalignments (ERM) of the main emerging countries in Asia and Latin America since the 1980s, so as to shed light on the 2000s by a long term analysis and compare with the industrialized countries' case. Our results confirm that ERM have been reduced since the mid-2000s at the world level, but the dollar remained overvalued against the East Asian countries, except the yen. Chinese, Indian and Brazilian exchange rate policies have been much contrasted since the 1980s. The Indian rupee has been more often overvalued while a more balance situation prevailed in Brazil only since the 2000s. The Latin American countries have faced wider and more dispersed ERM and current imbalances than East Asian countries. But Argentina, Chile and Uruguay benefits now of undervalued currencies while Mexico is closer to equilibrium.
An Inquiry into Exchanges Rate Misalignments As a Cause of the Major Global Trade Imbalances
SSRN Electronic Journal, 2017
In the context of debate on the competitive devaluation and trade imbalances, this study investigates the role of exchange rate misalignments as a determinant of trade imbalances in selected major trade surplus (Germany, China, Japan, Russia & KSA) and major trade deficit countries (USA, UK, France, India & Turkey). It does so by investigating whether the exchange rate has been misaligned from its equilibrium values (competitive devaluation) and whether there is some nexus between the real exchange rate misalignments and trade imbalances in under analysis economies. Employing a Structural Vector Autoregressive (SVAR) Model on data from Q1 2000 to Q1 2016, findings suggest that exchange rate misalignment from equilibrium may have some implications for the current account balance for the surplus and deficit countries. However, the effects observed were very mild and transitory. There was a heterogeneity in the response of the current account position to exchange rate misalignments in each country, concomitantly; the exchange rate misalignments shall not be seen as the sole responsible factor in the debate on global trade imbalances.
Exchange Rate Misalignments at World and European Levels: A FEER Approach
SSRN Electronic Journal, 2010
Since the mid-1990s, we observe an increase of world current account imbalances. These imbalances have only been partially reduced since the burst of the crisis in 2007. They reflect, to some extent, exchange rate misalignments, an issue which has been frequently studied in the literature. However, these imbalances, which have reinforced in the 2000s, are also important inside the Euro area. This analysis cannot be reduced to simple estimates of euro misalignment at the world level because of the specific constraints that exist for each member of the Euro area. This article aims to examine to what extent the intra-European imbalances reflect exchange rate misalignments for each "national euro".
Review of Development Economics, 2015
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Global imbalances and exchange rate adjustment
Journal of Policy Modeling, 2006
es una instancia de difusión y discusión de tópicos relevantes para los objetivos y el accionar del Banco Central, dirigida a un público más amplio que el de los especialistas. The Series of Economic Policy Papers of the Central Bank of Chile presents views and analyses of the Chilean economy and the conduct of monetary policy prepared by Bank authorities. This series, aimed at the general public, disseminates and discusses topics that are relevant to the goals and operations of the Central Bank.
Global Imbalances in a World of Inflexible Real Exchange Rates and Capital Controls
Global Economic Review, 2012
This paper addresses the issue of international payments in a stock-flow framework, by capturing the interaction between the current account balance and international assets portfolios of domestic and foreign investors. It is argued that the stability of such interaction may be affected by shifts in the preferences of investors, by the relative rate of return of different assets, and-more in general-by institutional settings. The model is then used for policy analysis purposes to derive the conditions for the existence of dynamic equilibria, and if they can be attained, under the assumption of market-distorting policy choices.
Global Imbalances, Current Account Rebalancing and Exchange Rate Adjustments
2011
We analyze the global imbalances and the required adjustments for rebalancing in current accounts and real exchange rates. We set up a two-country two-sector model for the US-China with two asymmetries. First, we assume that the size of China initially is one third of the US but its size becomes half of the US in the next ten years consistent with the fast growth expectations in China. Secondly, we assume that China initially runs a net export surplus against the US. Then we quantitatively study two adjustment scenarios. First scenario, called Slow Adjustment, assumes that in the process of growth, Chinese demand composition moves more towards domestic non-tradable sector. In this case, Chinese real exchange rate appreciates gradually and net export surplus also decreases slowly. Second scenario, called Quick Adjustment, assumes that in addition to the higher non-tradable share in output, net export surplus against US goes to zero quickly in …ve years. In this case, net export adjustment happens quickly and real exchange rates in China also appreciate faster and at a higher rate than Slow Adjustment case. Even though, global imbalances are eliminated faster in the Quick Adjustment case, high real appreciation in China hurts importers in the US. A comparison in terms of output shows that Slow Adjustments is preferred for both countries.