Automatic Stabilizer Feature of Fixed Exchange Rate Regimes in Emerging Markets

This paper shows that countries characterized by a financial accelerator mechanism may reverse the usual finding of the literature -- flexible exchange rate regimes do a worse job of insulating open economies from external shocks. I obtain this result with a calibrated small open economy model that endogenizes foreign interest rates by linking them to the banking sector's foreign currency leverage. This relationship renders exchange rate policy more important compared to the usual exogeneity assumption. I find empirical support for this prediction using the Local Projections method. Finally, 2nd order approximation to the model finds larger welfare losses under flexible regimes.

Monetary Policy, Exchange Rate Overshooting, and Endogenous Physical Capital

We develop an open economy macroeconomic model with real capital accumulation and microeconomic foundations. We show that expansionary monetary policy causes exchange rate overshooting, not once, but potentially twice; the secondary repercussion comes through the reaction of firms to changed asset prices and the firms' decisions to invest in real capital. The model sheds further light on the volatility of real and nominal exchange rates, and it suggests that changes in corporate sector profitability may affect exchange rates through international portfolio diversification in corporate securities.

El estado como eje articulador de las relaciones sociales

El presente trabajo intenta realizar una síntesis de cómo se fue articulando la sociedad a partir del modelo capitalista de producción en el período histórico que transcurre desde el impulso desarrollado en la Segunda Revolución Industrial, a finales del siglo XIX , hasta la primera década del siglo XXI. Este período determinará una forma de integración social que va estar vinculada al trabajo asalariado y ligada a un Estado más presente, articulador y distribuidor de la riqueza social. Algunos de los elementos constitutivos que sostuvieron este modelo fueron el New Deal y la política económica keynesiana, que van a perdurar hasta bien entrada la década de 1970. En esta etapa, la relación capital-trabajo va a entrar en crisis; el modelo keynesiano de pleno empleo no le es útil al capitalismo; y, por lo tanto, el Estado va a permitir la incorporación de un nuevo discurso, enarbolado por los denominados economistas liberales ortodoxos y, ya en la última década del siglo XX , por el economista norteamericano John Williamson, relacionado con un movimiento intelectual denominado "Consenso de Washington"; esto dando lugar una nueva forma de estructuración social en la que van a coexistir ganadores y perdedores del sistema. Se intenta explicar, además, el impacto que provocó en la Argentina adherir al modelo neoliberal a través de una economía abierta (1989-2002). Por último, describimos la situación de la Provincia de San Luis; los dispositivos y mecanismos que utilizó para contrarrestar los dos dígitos de desocupación producidos después del año 2002; para ello, nos referimos al Plan de Inclusión Social, expuesto a través de datos estadísticos tomados del INDEC y de la Dirección Provincial de Estadísticas y Censos de la Provincia de San Luis

El estado como eje articulador de las relaciones sociales

El presente trabajo intenta realizar una síntesis de cómo se fue articulando la sociedad a partir del modelo capitalista de producción en el período histórico que transcurre desde el impulso desarrollado en la Segunda Revolución Industrial, a finales del siglo XIX , hasta la primera década del siglo XXI. Este período determinará una forma de integración social que va estar vinculada al trabajo asalariado y ligada a un Estado más presente, articulador y distribuidor de la riqueza social. Algunos de los elementos constitutivos que sostuvieron este modelo fueron el New Deal y la política económica keynesiana, que van a perdurar hasta bien entrada la década de 1970. En esta etapa, la relación capital-trabajo va a entrar en crisis; el modelo keynesiano de pleno empleo no le es útil al capitalismo; y, por lo tanto, el Estado va a permitir la incorporación de un nuevo discurso, enarbolado por los denominados economistas liberales ortodoxos y, ya en la última década del siglo XX , por el economista norteamericano John Williamson, relacionado con un movimiento intelectual denominado "Consenso de Washington"; esto dando lugar una nueva forma de estructuración social en la que van a coexistir ganadores y perdedores del sistema. Se intenta explicar, además, el impacto que provocó en la Argentina adherir al modelo neoliberal a través de una economía abierta (1989-2002). Por último, describimos la situación de la Provincia de San Luis; los dispositivos y mecanismos que utilizó para contrarrestar los dos dígitos de desocupación producidos después del año 2002; para ello, nos referimos al Plan de Inclusión Social, expuesto a través de datos estadísticos tomados del INDEC y de la Dirección Provincial de Estadísticas y Censos de la Provincia de San Luis

El estado como eje articulador de las relaciones sociales

El presente trabajo intenta realizar una síntesis de cómo se fue articulando la sociedad a partir del modelo capitalista de producción en el período histórico que transcurre desde el impulso desarrollado en la Segunda Revolución Industrial, a finales del siglo XIX , hasta la primera década del siglo XXI. Este período determinará una forma de integración social que va estar vinculada al trabajo asalariado y ligada a un Estado más presente, articulador y distribuidor de la riqueza social. Algunos de los elementos constitutivos que sostuvieron este modelo fueron el New Deal y la política económica keynesiana, que van a perdurar hasta bien entrada la década de 1970. En esta etapa, la relación capital-trabajo va a entrar en crisis; el modelo keynesiano de pleno empleo no le es útil al capitalismo; y, por lo tanto, el Estado va a permitir la incorporación de un nuevo discurso, enarbolado por los denominados economistas liberales ortodoxos y, ya en la última década del siglo XX , por el economista norteamericano John Williamson, relacionado con un movimiento intelectual denominado "Consenso de Washington"; esto dando lugar una nueva forma de estructuración social en la que van a coexistir ganadores y perdedores del sistema. Se intenta explicar, además, el impacto que provocó en la Argentina adherir al modelo neoliberal a través de una economía abierta (1989-2002). Por último, describimos la situación de la Provincia de San Luis; los dispositivos y mecanismos que utilizó para contrarrestar los dos dígitos de desocupación producidos después del año 2002; para ello, nos referimos al Plan de Inclusión Social, expuesto a través de datos estadísticos tomados del INDEC y de la Dirección Provincial de Estadísticas y Censos de la Provincia de San Luis

Agricultural Policies and Development of Myanmar's Agricultural Sector: An Overview

This paper reviews the development of the agricultural sector in Myanmar after the transition to an open economy in 1988 and analyzes the nature as well as the performance of the agricultural sector. The avoidance of social unrest and the maintenance of control by the regime are identified as the two key factors that have determined the nature of agricultural policy after 1988. A major consequence of agricultural policy has been a clear difference in development paths among the major crops. Production of crops that had a potential for development showed sluggish growth due to policy constraints, whereas there has been a self-sustaining increase in the output of those crops that have fallen outside the remit of agricultural policy.

An Empirical Analysis of the Monetary Policy Reaction Function in India

This paper empirically analyzes India’s monetary policy reaction function by applying the Taylor (1993) rule and its open-economy version which employs dynamic OLS. The analysis uses monthly data from the period of April 1998 to December 2007. When the simple Taylor rule was estimated for India, the output gap coefficient was statistically significant, and its sign condition was found to be consistent with theoretical rationale; however, the same was not true of the inflation coefficient. When the Taylor rule with exchange rate was estimated, the coefficients of output gap and exchange rate had statistical significance with the expected signs, whereas the results of inflation remained the same as before. Therefore, the inflation rate has not played a role in the conduct of India’s monetary policy, and it is inappropriate for India to adopt an inflation-target type policy framework.

Liability dollarization and fear of floating

This paper explores the idea that fear of floating can be justified as an optimal discretionary monetary policy in a dollarized emerging economy. Specifically, I consider a small open economy in which intermediate goods importers borrow in foreign currency and face a credit constraint. In this economy, exchange rate depreciation not only worsens importers' net-worth but also increases the financing amount in domestic currency, therefore exaggerating their borrowing finance premium. Besides, because of high exchange rate pass-through into import prices, fluctuations in the exchange rate also have strong impacts on domestic prices and production. These effects, together, magnify the macroeconomic consequences of the floating exchange rate policy in response to external shocks. The paper shows that the floating exchange rate regime is dominated by the fixed exchange rate regime in the role of cushioning shocks and in welfare terms.

International Capital Flows and Monetary Policy Spillovers

This dissertation examines the drivers and implications of international capital flows. The overarching motivation is the observation that countries not at the centre of global financial markets are subject to considerable spillovers from centre countries, notably from their monetary policy. I present new empirical evidence on the determinants of the observed patterns of international capital flows and monetary policy spillovers, and study their effect on both financial markets and the real economy. In Chapter 2 I provide evidence on the determinants of a puzzling negative correlation observed between productivity growth and net capital inflows to developing and emerging market economies (EMEs) since 1980. By disaggregating net capital inflows into their gross components, I show that this negative correlation is explained by capital outflows related to purchases of very liquid assets from the fastest growing countries. My results suggest a desire for international portfolio diversification in liquid assets by fast growing countries is driving much of the original puzzle. In the reminder of my dissertation I pivot to study the foreign characteristics that drive international capital flows and monetary policy spillovers, with a particular focus on the role of unconventional monetary policy in the United States (U.S.). In Chapter 3 I show that a significant portion of the heterogeneity in EMEs' asset price adjustment following the quantitative easing operations by the Federal Reserve (the Fed) during 2008-2014 can be explained by the degree of bilateral capital market frictions between these countries and the U.S. This is true even after accounting for capital controls, exchange rate regimes, and domestic monetary policies. Chapter 4, co-authored with Michal Ksawery Popiel, studies unconventional monetary policy in a small open economy, looking specifically at the case of Canada since the global financial crisis. We quantify the effect Canadian unconventional monetary policy shocks had on the real economy, while carefully controlling for and quantifying spillovers from U.S. unconventional monetary policy. Our results indicate that the Bank of Canada's unconventional monetary policy increased Canadian output significantly from 2009-2010, but that spillovers from the Fed's policy were even more important for increasing Canadian output after 2008.

Essays on International Asset Allocation and Pricing

Thesis (Ph.D.)--University of Washington, 2016-06

Essays on Fiscal Policy, Monetary Policy and Currency Unions: Exploring the Role of Informality and Labor Mobility

Thesis (Ph.D.)--University of Washington, 2016-06

Carbon emissions locked - in trade

In recent years there has been a growing concern about the emission trade balance of countries. It is due to the fact that countries with an open economy are active players in the international trade, though trade is not only a major factor in forging a country’s economic structure anymore, but it does contribute to the movement of embodied emissions beyond the country borders. This issue is especially relevant from the carbon accounting policy’s point of view, as it is known that the production-based principle is in effect now in the Kyoto agreement. The study aims at revealing the interdependence of countries on international trade and its environmental impacts, and how the carbon accounting method plays a crucial role in evaluating a country’s environmental performance and its role in the climate mitigation processes. The input-output models are used in the methodology, as they provide an appropriate framework for this kind of environmental accounting; the analysis shows an international comparison of four European countries (Germany, the United Kingdom, the Netherlands, and Hungary) with extended trading activities and carbon emissions. Moving from the production-based approach in the climate policy, to the consumptionperspective principle and allocation [15], it would also help increasing the efficiency of emission reduction targets and the evaluation of the sustainability dimension and its impacts of international trade. The results of the study have shown that there is an importance of distinction between the two emission allocation approaches, both from global and local level point of view.

A Consumption-Based Approach to Carbon Emission Accounting – Sectoral Differences and Environmental Benefits

In recent years there has been growing concern about the emission trade balances of countries. This is due to the fact that countries with an open economy are active players in international trade. Trade is not only a major factor in forging a country’s economic structure, but contributes to the movement of embodied emissions beyond country borders. This issue is especially relevant from the carbon accounting policy and domestic production perspective, as it is known that the production-based principle is employed in the Kyoto agreement. The research described herein was designed to reveal the interdependence of countries on international trade and the corresponding embodied emissions both on national and on sectoral level and to illustrate the significance of the consumption-based emission accounting. It is presented here to what extent a consumption-based accounting would change the present system based on production-based accounting and allocation. The relationship of CO2 emission embodied in exports and embodied in imports is analysed here. International trade can blur the responsibility for the ecological effects of production and consumption and it can lengthen the link between consumption and its consequences. Input-output models are used in the methodology as they provide an appropriate framework for climate change accounting. The analysis comprises an international comparative study of four European countries (Germany, the United Kingdom, the Netherlands, and Hungary) with extended trading activities and carbon emissions. Moving from a production-based approach in climate policy to a consumption-based principle and allocation approach would help to increase the efficiency of emission reductions and would force countries to rethink their trading activities in order to decrease the environmental load of production activities. The results of this study show that it is important to distinguish between the two emission accounting approaches, both on the global and the local level.

The international impact of productivity shocks

Even though many studies have confirmed the Feldstein-Horioka (1980) finding that savings and investment rates are highly correlated, there is no consensus on the major reason for this correlation. The purpose of this dissertation is to develop theoretical models and calibrate and simulate these to compare their implications to explain the observed time-series comovement between savings and investment in an attempt to show that this high correlation may stem from technological shocks.^ The dissertation is comprised of three studies. The first two studies construct overlapping-generations, two-economy models of saving and investment under conditions of perfect international capital mobility. The second study differs from the first by endogenizing the labor supply. Employing simulations, the models are used to generate time-series for savings and investment. These are then compared with the actual data for specific economies. The models show that productivity shocks produce a high correlation between savings and investment. Further, while the model with exogenous labor supply displays monotonic adjustment, the economy with endogenous labor supply adjusts cyclically.^ The third model, on the other hand, constructs a general equilibrium model for a small open economy. The study is based on two important elements: adjustment costs in investment and endogenous, recursive time preferences. Again, the simulation results show that the model generates, at least in a significant part of the adjustment path, a positive correlation between domestic savings and investment in response to a supply shock. ^

The issue of macroeconomic closure revisited and extended

Léon Walras (1874) already had realized that his neo-classical general equilibrium model could not accommodate autonomous investment. Sen analysed the same issue in a simple, one-sector macroeconomic model of a closed economy. He showed that fixing investment in the model, built strictly on neo-classical assumptions, would make the system overdetermined, thus, one should loosen some neo-classical condition of competitive equilibrium. He analysed three not neo-classical “closure options”, which could make the model well determined in the case of fixed investment. Others later extended his list and it showed that the closure dilemma arises in the more complex computable general equilibrium (CGE) models as well, as does the choice of adjustment mechanism assumed to bring about equilibrium at the macro level. By means of numerical models, it was also illustrated that the adopted closure rule can significantly affect the results of policy simulations based on a CGE model. Despite these warnings, the issue of macro closure is often neglected in policy simulations. It is, therefore, worth revisiting the issue and demonstrating by further examples its importance, as well as pointing out that the closure problem in the CGE models extends well beyond the problem of how to incorporate autonomous investment into a CGE model. Several closure rules are discussed in this paper and their diverse outcomes are illustrated by numerical models calibrated on statistical data. First, the analyses is done in a one-sector model, similar to Sen’s, but extended into a model of an open economy. Next, the same analyses are repeated using a fully-fledged multisectoral CGE model, calibrated on the same statistical data. Comparing the results obtained by the two models it is shown that although, using the same closure option, they generate quite similar results in terms of the direction and – to a somewhat lesser extent – of the magnitude of change in the main macro variables, the predictions of the multi-sectoral CGE model are clearly more realistic and balanced.