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Social and Behavioral Sciences Commons™
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Articles 1 - 7 of 7
Full-Text Articles in Social and Behavioral Sciences
Emerging Market Currency Composition Of Reserves, Denomination Of Trade And Currency Movements, Robert N. Mccauley, Hiro Ito, Tracy Chan
Emerging Market Currency Composition Of Reserves, Denomination Of Trade And Currency Movements, Robert N. Mccauley, Hiro Ito, Tracy Chan
Economics Faculty Publications and Presentations
This article analyses the relationships among the unit of account and means of exchange functions of an international currency, on the one hand, and its store of value in official use, on the other hand. Historical evidence links the currency composition of reserves to currency movements. The currency composition of reserves is strongly related in the cross-section to both currency movements and the currency denomination of trade. Data limitations make it hard to distinguish these two factors. A panel analysis of 5 countries from central and eastern Europe shows that both trade invoicing and currency movements drive changing official reserve …
The More Divergent, The Better? Lessons On Trilemma Policies And Crises For Asia, Joshua Aizenman, Hiro Ito
The More Divergent, The Better? Lessons On Trilemma Policies And Crises For Asia, 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 extent of policy divergence among the three trilemma policy choices—monetary independence, exchange rate stability, and financial openness—we find that emerging market economies have adopted trilemma policy combinations with the smallest degree of policy divergence in the last 15 years. We then investigate whether and to what extent the degree of open macro policy convergence affects the probability of a crisis and find that a developing or emerging market economy with a higher …
International Reserves Before And After The Global Crisis: Is There No End To Hoarding?, Joshua Aizenman, Yin-Wong Cheung, Hiro Ito
International Reserves Before And After The Global Crisis: Is There No End To Hoarding?, Joshua Aizenman, Yin-Wong Cheung, Hiro Ito
Economics Faculty Publications and Presentations
We evaluate the global financial crisis (GFC) and the structural changes of recent years that have been associated with new patterns of hoarding international reserves. We confirm that the determining factors of international reserves are evolving with developments in the global economy. From 1999–2006, the pre-GFC period, gross saving is associated with higher international reserves in developing and emerging markets. An outward direct-investment effect is consistent with the view of diverting international assets from the international reserve account, the “Joneses’ effect” lends support to the rivalry hoarding motivation, and commodity price volatility induces hoarding against uncertainty. During the 2007–2009 GFC, …
The “Impossible Trinity” Hypothesis In An Era Of Global Imbalances: Measurement And Testing, Joshua Aizenman, Menzie David Chinn, Hiro Ito
The “Impossible Trinity” Hypothesis In An Era Of Global Imbalances: Measurement And Testing, Joshua Aizenman, Menzie David Chinn, Hiro Ito
Economics Faculty Publications and Presentations
We outline new metrics for measuring the trilemma aspects: exchange rate flexibility, monetary independence, and capital account openness, taking into account recent substantial international reserve accumulation. Since 2000, the trilemma variables in emerging markets have converged towards intermediate levels, characterizing by managed flexibility, using sizable international reserves as a buffer while retaining some degree of monetary autonomy. We test the linearity of the trilemma, and find that the weighted sum of the three trilemma variables adds up to a constant. Thus, a rise in one trilemma variable should be traded-off with a drop of the weighted sum of the other …
East Asia And Global Imbalances: Saving, Investment, And Financial Development, Hiro Ito, Menzie David Chinn
East Asia And Global Imbalances: Saving, Investment, And Financial Development, Hiro Ito, Menzie David Chinn
Economics Faculty Publications and Presentations
We investigate the role of budget balances, financial development and openness, in the evolution of global imbalances. Financial development – or the lack thereof – has received considerable attention as a possible contributing factor to the development of persistent and expanding current account imbalances. Several observers have argued that the depth and sophistication of US capital markets have caused capital to flow from relatively underdeveloped East Asian financial markets. In this paper, we extend our previous work by examining the effect of different types and aspects of financial development. Our cross-country analysis, encompassing a sample of 19 industrialized countries and …
Global Current Account Imbalances: American Fiscal Policy Versus East Asian Savings, Menzie David Chinn, Hiro Ito
Global Current Account Imbalances: American Fiscal Policy Versus East Asian Savings, Menzie David Chinn, Hiro Ito
Economics Faculty Publications and Presentations
We consider the origins of global current account imbalances. We first discuss how the expansion of the US current account deficit and the decrease in global real interest rates can be reconciled with the widespread view that American expansionary fiscal policy is partly the source of current trends. We then investigate empirically the medium-term determinants of the current account using a model that controls for factors related to institutional development. In addition to the conventional macroeconomic factors, we examine a series of environmental factors, including the degree of financial openness and the extent of legal development. We find that for …
Current Account Balances, Financial Development And Institutions: Assaying The World “Saving Glut”, Menzie David Chinn, Hiro Ito
Current Account Balances, Financial Development And Institutions: Assaying The World “Saving Glut”, Menzie David Chinn, Hiro Ito
Economics Faculty Publications and Presentations
We critically assess several of the key assertions underlying the global saving glut hypothesis. First, we investigate whether the behavior of the U.S. current account behavior is anomalous in light of previous industrial country experience. Second, we determine whether East Asian current account balances are predictable using standard macroeconomic variables, augmented with institutional factors. Finally, we investigate whether higher levels of financial development in key East Asian economies would result in smaller current account surpluses. We find that a one percentage-point increase in the budget balance would increase the current account balance by 0.10 to 0.49 percentage-points for industrialized countries, …