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Articles 1 - 7 of 7
Full-Text Articles in Social and Behavioral Sciences
Central Bank Swap Arrangements In The Covid-19 Crisis, Joshua Aizenman, Hiro Ito, Gurnain Kaur Pasricha
Central Bank Swap Arrangements In The Covid-19 Crisis, Joshua Aizenman, Hiro Ito, Gurnain Kaur Pasricha
Economics Faculty Publications and Presentations
Facing acute strains in the offshore dollar funding markets during the COVID-19 crisis, the Federal Reserve (Fed) provided US dollar liquidity to the global economy by reactivating or enhancing swap arrangements with other central banks and establishing a new repo facility for financial institutions and monetary authorities (FIMA). This paper assesses motivations for the Fed liquidity lines, and the effects and spillovers of US dollar auctions by central banks using these lines. We find that the access to the Fed liquidity arrangements was driven by the recipient economies’ close financial and trade ties with the US. Access to dollar liquidity …
The Political-Economy Trilemma, Joshua Aizenman, Hiro Ito
The Political-Economy Trilemma, Joshua Aizenman, Hiro Ito
Economics Faculty Publications and Presentations
This paper investigates Rodrik’s political-economy trilemma: policy makers face a trade-off of choosing two out of three policy goals or governance styles, namely, (hyper-) globalization, national sovereignty, and democracy. We develop a set of indexes that measure the extent of attainment of the three factors for 139 countries in the period of 1975-2016. Using these indexes, we examine the validity of the hypothesis of the political-economy trilemma by testing whether the three trilemma variables are linearly related. We find that, for industrialized countries, there is a linear relationship between globalization and national sovereignty (i.e., a dilemma), and that for developing …
East Asian Economies And Financial Globalization In The Post-Crisis World, Joshua Aizenman, Hiro Ito
East Asian Economies And Financial Globalization In The Post-Crisis World, Joshua Aizenman, Hiro Ito
Economics Faculty Publications and Presentations
This paper assesses the East Asian Economies’ openness to cross-border capital flows and exchange rate arrangements in the past decades, with the main focus on emerging market economies. Using Mundell’s trilemma indexes, we note that the convergence of the three policy goals in East Asia toward a “middle ground” pre-dates the convergence of these indices in other regions. Another more recent development involves the high level of international reserve (IR) holdings–a feature that is known as the most distinct characteristic of Asian EMEs. Financial globalization seems to have made asset prices and interest rates in Asian EMEs more vulnerable to …
Living With The Trilemma Constraint: Relative Trilemma Policy Divergence, Crises, And Output Losses For Developing Countries, Joshua Aizenman, Hiro Ito
Living With The Trilemma Constraint: Relative Trilemma Policy Divergence, Crises, And Output Losses For Developing Countries, Joshua Aizenman, Hiro Ito
Economics Faculty Publications and Presentations
This paper investigates the potential impacts of the degree of divergence in open macroeconomic policies in the context of the trilemma hypothesis. Using an index that measures the relative policy divergence among the three trilemma policy choices, namely monetary independence, exchange rate stability, and financial openness, we find that emerging market countries have adopted trilemma policy combinations with the least degree of relative policy divergence in the last fifteen years. We find that a developing or emerging market country with a higher degree of relative policy divergence is more likely to experience a currency or debt crisis. However, a developing …
The Financial Crisis, Rethinking Of The Global Financial Architecture, And The Trilemma, Joshua Aizenman, Menzie David Chinn, Hiro Ito
The Financial Crisis, Rethinking Of The Global Financial Architecture, And The Trilemma, Joshua Aizenman, Menzie David Chinn, Hiro Ito
Economics Faculty Publications and Presentations
This paper extends our previous paper (Aizenman, Chinn, and Ito 2008) and explores some of the unexplored questions. First, we examine the channels through which the trilemma policy configurations affect output volatility. Secondly, we investigate how trilemma policy configurations affect the output performance of the economies under severe crisis situations. Thirdly, we look into how trilemma configurations have evolved in the aftermath of economic crises in the past. We find that trilemma policy configurations and external finances affect output volatility mainly through the investment channel. While a higher degree of exchange rate stability could stabilize the real exchange rate movement, …
Surfing The Waves Of Globalization: Asia And Financial Globalization In The Context Of Trilemma, Joshua Aizenman, Menzie David Chinn, Hiro Ito
Surfing The Waves Of Globalization: Asia And Financial Globalization In The Context Of Trilemma, Joshua Aizenman, Menzie David Chinn, Hiro Ito
Economics Faculty Publications and Presentations
Using the "trilemma indexes" developed by Aizenman et al. (2008) that measure the extent of achievement in each of the three policy goals in the trilemma—monetary independence, exchange rate stability, and financial openness—this paper examines how policy configurations affect macroeconomic performances with focus on the Asian economies. We find that the three policy choices do not matter for per capita economic growth. However, they do matter for output volatility and the medium-term level of inflation. Greater monetary independence is associated with lower output volatility while greater exchange rate stability implies greater output volatility, which can be mitigated if a country …
The Emerging Global Financial Architecture: Tracing And Evaluating New Patterns Of The Trilemma Configuration, Joshua Aizenman, Menzie David Chinn, Hiro Ito
The Emerging Global Financial Architecture: Tracing And Evaluating New Patterns Of The Trilemma Configuration, Joshua Aizenman, Menzie David Chinn, Hiro Ito
Economics Faculty Publications and Presentations
This paper investigates how the trilemma policy mix affects economic performance in developing countries. We find that greater monetary independence can dampen output volatility, while greater exchange rate stability is associated with greater output volatility, which can be mitigated by reserve accumulation; greater monetary autonomy is associated with higher inflation, while greater exchange rate stability and greater financial openness is linked with lower inflation; pursuit of exchange rate stability can increase output volatility when financial development is at an intermediate stage. Greater financial openness, when accompanied by a high level of financial development, reduces output volatility.