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Full-Text Articles in Social and Behavioral Sciences
Price-Based Measurement Of Financial Globalization: A Cross-Country Study Of Interest Rate Parity, Hiro Ito, Menzie David Chinn
Price-Based Measurement Of Financial Globalization: A Cross-Country Study Of Interest Rate Parity, Hiro Ito, Menzie David Chinn
Economics Faculty Publications and Presentations
We characterize the relationship between ex post exchange rate depreciation and the interest differential for a set of countries that spans both developed and emerging market economies. The measured ex post uncovered interest differentials in terms of both levels and absolute values are then related to measures of trade and financial openness, financial development, government budget balances, institutional development, and exchange rate regimes. We find that there is wide diversity in the coefficient relating depreciations and interest differentials. Some of these differing results can be attributed to differences in inflation volatility, financial development, trade openness, capital account openness, legal development, …
A New Measure Of Financial Openness, Menzie David Chinn, Hiro Ito
A New Measure Of Financial Openness, Menzie David Chinn, Hiro Ito
Economics Faculty Publications and Presentations
We create a new index that measures the extent of openness in capital account transactions. Despite the abundance of literature and policy analyses regarding the effect of financial liberalization, the debate is far from settled. One of the reasons for that outcome is the lack of proper ways of measuring the extent of the openness in cross-border financial transactions. We seek to remedy this deficiency by creating an index aimed at measuring the extensity of capital controls based on the information from the IMF’s Annual Report on Exchange Arrangements and Exchange Restrictions (AREAER). This paper details how we construct the …
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 …