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Flexible Exchange Rate Regime (flexible + exchange_rate_regime)

Distribution by Scientific Domains
Business, Economics, Finance and Accounting100%

Selected Abstracts

Testing for Balance Sheet Effects in Emerging Markets: A Non-Crisis Setting,

INTERNATIONAL FINANCE, Issue 2 2010
Uluc Aysun
The literature has established that emerging market economies are better insulated from large external shocks during a financial crisis when they adopt a flexible exchange rate regime. Looking at the strength of firms' balance sheets, this paper shows that the opposite holds true in non-crisis periods. The reason is that balance sheets and thus spending decisions are less affected by external shocks under fixed regimes. This result is obtained through several theoretical and empirical methodologies that are useful for identifying balance sheet effects in a non-crisis setting. Simulations reveal a larger (smaller) output response under flexible regimes when these effects are included (excluded). Although the transmission of foreign interest rate shocks to domestic interest rates is stronger under fixed regimes, it appears the limited effects on balance sheets generate a more muted output response. [source]

Financial Globalization: Unequal Blessings

INTERNATIONAL FINANCE, Issue 3 2002
Augusto De La Torre
This paper presents a framework to analyse financial globalization. It argues that financial globalization needs to take into account the relation between money (particularly in its role as store of value), asset and factor price flexibility, and contractual and regulatory institutions. Countries that have the ,blessed trinity' (international currency, flexible exchange rate regime, and sound contractual and regulatory environment) can integrate successfully into the (imperfect) world financial markets. Developing countries, though, normally display the ,unblessed trinity' (weak currency, fear of floating, and weak institutional framework). The paper defines and discusses two alternative avenues (a ,dollar trinity' and a ,peso trinity') for developing countries to safely embrace international financial integration while the blessed trinity remains beyond reach. [source]

Exchange Rate Instability: Japan's Micro,Macro Experiences and Implications for China

CHINA AND WORLD ECONOMY, Issue 2 2006
Mamoru Ishida
E65; F23; F31 Abstract Since 1985, the yen-dollar exchange rates repeatedly fluctuated and climbed to a level that could not be justified by economic fundamentals. The impacts on the Japanese economy were serious and far-reaching. Since 21 July 2005, China has been moving toward a more flexible exchange rate regime. Keeping RMB exchange rates basically stable and providing Chinese industries with means to hedge exchange rate risks are essential for China's sound economic development. Edited by Zhinan Zhang [source]

China's Economic Prospects and Sino,US Economic Relations

CHINA AND WORLD ECONOMY, Issue 2 2006
Pingfan Hong
F00; P21 Abstract A better comprehension of the mixed sentiment in the rest of world towards the rapid rise of the Chinese economy will depend on the understanding of some key features of the Chinese economy, such as those associated with its size, structure and institution. To further sustain its high growth, China is facing more challenges than it has encountered in the past 2 decades, including a gamut of material constraints. Although polices and technological progress might alleviate many of these constraints, the ultimate solution will still lie in continued institutional reform. China's recent move towards a more flexible exchange rate regime is in line with its broad reform and in accordance with the progress of its development. However, such a move will have limited immediate effects on the prodigious US trade deficit, which itself is a problem rooted in the flawed international reserve system, far beyond a Sino-US trade issue. Edited by Xiaoming Feng [source]

Fixed versus Flexible Exchange Rates: Evidence from Developing Countries

ECONOMICA, Issue 295 2007
MATHIAS HOFFMANN
This paper investigates the hypothesis that in a small open economy flexible exchange rates act as a ,shock absorber' and mitigate the effects of external shocks more effectively than fixed exchange rate regimes. Using a sample of 42 developing countries, the paper assesses whether the responses of real GDP, the trade balance and the real exchange rate to world output and world real interest rate shocks differ across exchange rate regimes. The paper shows that there are significant differences in the variability of macroeconomic aggregates under fixed and flexible exchange rate regimes. [source]

Does Exchange Rate Policy Matter for Growth?

INTERNATIONAL FINANCE, Issue 3 2003
Jeannine Bailliu
Previous studies on whether the nature of the exchange rate regime influences a country's medium-term growth performance have been based on a tripartite classification scheme that distinguishes between pegged, intermediate and flexible exchange rate regimes. This classification scheme, however, leads to a situation where two of the categories (intermediate and flexible) characterize solely the exchange rate regime, whereas the third (pegged) characterizes both the exchange rate regime and the monetary policy framework. Our study refines this classification scheme by accounting for different monetary policy frameworks, classifying monetary arrangements based on the presence of an explicit monetary policy ,anchor', such as the exchange rate or other targeted nominal variable. We estimate the impact of exchange rate arrangements on growth in a panel-data set of 60 countries over the period 1973,1998. We find evidence that exchange rate regimes characterized by a monetary policy anchor, whether they are pegged, intermediate, or flexible, exert a positive influence on economic growth. We also find evidence that intermediate/flexible regimes without an anchor are detrimental for growth. Our results thus suggest that it is the presence of a monetary policy anchor, rather than the type of exchange rate regime per se, that is important for economic growth. Furthermore, our work emphasizes the importance of considering the monetary policy framework that accompanies the exchange rate arrangement when assessing the macroeconomic performance of alternative exchange rate regimes. [source]