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The views expressed in this paper are those of the author(s) only, and the presence of them, or of links to them, on the IMF website does not imply that the IMF, its
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Authorized for distribution by Marta Castello-Branco
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Conditional on choosing a pegged exchange rate regime, what determines the currency to which countries peg or “anchor ” their exchange rate? This paper aims to answer this question using a panel multinomial logit framework, covering more... more
Conditional on choosing a pegged exchange rate regime, what determines the currency to which countries peg or “anchor ” their exchange rate? This paper aims to answer this question using a panel multinomial logit framework, covering more than 100 countries for the period 1980-1998. We find that trade network externalities are a key determinant of anchor currency choice, implying that there are multiple steady states for the distribution of anchor currencies in the international monetary system. Other factors found to be related to anchor currency choice include the symmetry of output co-movement, the currency denomination of debt, and legal or colonial origins.
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This paper studies institutional divergence among two types of transition economies: (1) the former socialist economies of Central and Eastern Europe, which have gradually been converging to European levels of institutional quality, and... more
This paper studies institutional divergence among two types of transition economies: (1) the former socialist economies of Central and Eastern Europe, which have gradually been converging to European levels of institutional quality, and (2) the countries of the Former Soviet Union, which have, on average, made much less progress with institutional reform. We aim to explain these differences in the speed of institutional reform, which we measure as improvements in four Worldwide Governance Indicators: government effectiveness, regulatory quality, rule of law (including property rights), and control of corruption. We find that the most robust factors explaining institutional divergence are cultural/religious roots (Huntington’s definition of "civilization"), the number of years under a socialist regime, and the presence of natural resource rents. Less significant factors are imperial history (whether a country used to be a member of the Russian empire) and the prospect of EU...
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namely Bulgaria, Croatia and Romania, of two CIS economies, namely Russia and Ukraine, and of Turkey. A systematic approach in terms of different time horizons at which the equilibrium exchange rate is assessed is conducted, combined with... more
namely Bulgaria, Croatia and Romania, of two CIS economies, namely Russia and Ukraine, and of Turkey. A systematic approach in terms of different time horizons at which the equilibrium exchange rate is assessed is conducted, combined with a careful analysis of country-specific factors. The deviation from absolute purchasing power parity (PPP) and from the real exchange rate, which is given by relative productivity levels, is investigated. For Russia, a first look is taken at the Dutch disease phenomenon as a possible driving force behind equilibrium exchange rates. As a next step, a Behavioral Equilibrium Exchange Rate (BEER) model including productivity and net foreign assets is estimated using both time series and panel techniques. Control variables such as openness, public debt and public expenditures are also used to check for the robustness of the results. In a final stage, total real misalignment bands are computed for the countries under study.
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De geschatte effecten van zes voorgestelde bilaterale EU-handelsakkoorden op de Nederlandse economie zijn klein maar over het algemeen positief. Vijf van de zes handelsakkoorden zouden in Nederland leiden tot een hoger reeel BBP, lagere... more
De geschatte effecten van zes voorgestelde bilaterale EU-handelsakkoorden op de Nederlandse economie zijn klein maar over het algemeen positief. Vijf van de zes handelsakkoorden zouden in Nederland leiden tot een hoger reeel BBP, lagere prijzen en meer werkgelegenheid. Als alle handelsakkoorden tegelijk in zouden gaan, zou het Nederlands BBP stijgen met een halve procent (€3,3 miljard). De impact op derde landen is gemiddeld licht negatief, positief in sommige gevallen, maar over het algemeen klein.
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De lage internationale cacaoprijs draagt bij aan extreme armoede onder cacaoboeren. De voornaamste reden waarom de prijs zo laag ligt, is niet de hoge marktconcentratie onder cacaobedrijven, maar het gebrek aan alternatieve... more
De lage internationale cacaoprijs draagt bij aan extreme armoede onder cacaoboeren. De voornaamste reden waarom de prijs zo laag ligt, is niet de hoge marktconcentratie onder cacaobedrijven, maar het gebrek aan alternatieve inkomensbronnen voor boeren, waardoor zij cacao blijven aanbieden ondanks de lage prijs. Ontwikkelingsprogramma’s die de inkomens van cacaoboeren pogen te verhogen door productiviteitsverbetering zijn mogelijk contraproductief, omdat een hoger aanbod de prijs verder naar beneden drukt.
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ABSTRACT In macroeconomic theory, a disproportionate amount of attention has been paid to models with 'global' or random interaction structures in which each agent interacts, or has an equal probability of interacting,... more
ABSTRACT In macroeconomic theory, a disproportionate amount of attention has been paid to models with 'global' or random interaction structures in which each agent interacts, or has an equal probability of interacting, with every other agent in the economy. By contrast, recent models have been developed in which the interaction structure is local but perfectly regular (e.g. nearest neighbor interactions on a two-dimensional lattice). Since local interaction structures are often implicitly due to some type of market failure, it is perhaps not surprising that the latter models may generate inefficient aggregate outcomes as well as persistent inequality. In this paper, it is argued that actual market economies tend to have network structures that lie somewhere between the two extremes. That is, most agents interact locally with only a few exchange partners (e.g. their local grocery store, their employer), whereas relatively few agents (e.g., chain stores, multinationals, governments) engage in 'global' trade. Starting from a perfectly 'localized' economy, it is shown that adding only a few global traders greatly enhances the efficiency of the network but not by enough to eliminate persistent inequality. This relation between efficiency and inequality is analyzed in the light of complexity theory.
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ABSTRACT This paper studies the effects of local interactions on the distribution of employment in a Keynesian-type model with strategic complementarities. It is shown that rational expectations generate symmetric equilibria for any... more
ABSTRACT This paper studies the effects of local interactions on the distribution of employment in a Keynesian-type model with strategic complementarities. It is shown that rational expectations generate symmetric equilibria for any interaction structure except autarky. Under adaptive expectations, the distribution of employment converges to a rational expectations equilibrium, implying that asymmetric equilibria, or inequality, cannot persist in the long run. On the basis of both analytical and computational results, however, it is shown that symmetric equilibria are unstable in the sense that, in the presence of noise, local interactions can produce globally persistent inequality.
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In 2003, Russia experienced rapid domestic money growth, while inflation remained lower than expected. In this paper, we show that this "missing inflation" could be explained in part by de-dollarization. While money demand... more
In 2003, Russia experienced rapid domestic money growth, while inflation remained lower than expected. In this paper, we show that this "missing inflation" could be explained in part by de-dollarization. While money demand functions for dollarized economies tend to suffer from instability, we show that a stable money demand function for Russia can be found for "effective broad money", which includes an estimate of foreign cash holdings. Moreover, we find that an excess supply of effective broad money is inflationary, while other excess money measures are not, and that effective broad money growth has the strongest and most persistent effect on short-run inflation.
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In macroeconomic theory, a disproportionate amount of attention has been paid to models with 'global' or random interaction structures in which each agent interacts, or has an equal probability of interacting, with every other... more
In macroeconomic theory, a disproportionate amount of attention has been paid to models with 'global' or random interaction structures in which each agent interacts, or has an equal probability of interacting, with every other agent in the economy. By contrast, recent models have been developed in which the interaction structure is local but perfectly regular (e.g. nearest neighbor interactions on a two-dimensional lattice). Since local interaction structures are often implicitly due to some type of market failure, it is perhaps not surprising that the latter models may generate inefficient aggregate outcomes as well as persistent inequality. In this paper, it is argued that actual market economies tend to have network structures that lie somewhere between the two extremes. That is, most agents interact locally with only a few exchange partners (e.g. their local grocery store, their employer), whereas relatively few agents (e.g., chain stores, multinationals, governments) en...
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... Page 2. Working Paper A INTERNATIONAL MONETARY FUND Page 3. WP/03/96 \MF Working Paper Network Externalities and Dollarization Hysteresis: The Case of RussiaNienke Oomes INTERNATIONAL MONETARY FUND Page 4. ...
Research Interests: Economics, Econometrics, Law of large numbers, Probability, Correlation, and 15 moreGoodness of Fit, Statistic, Statistical Significance, Equation, Autocorrelation, Heteroscedasticity, Network Externalities, Economic Models, Standard Errors, Independent Variable, Covariance, Functional Form, Functional forms, Network externality, and ratchet effect
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What determines the currency to which countries peg or "anchor" their exchange rate? Data for over 100 countries between 1980 and 1998 reveal that trade network externalities are a key determinant. This implies that anchor... more
What determines the currency to which countries peg or "anchor" their exchange rate? Data for over 100 countries between 1980 and 1998 reveal that trade network externalities are a key determinant. This implies that anchor currency choice may well be suboptimal in that certain currencies, e.g., the U.S. dollar, could be oversubscribed. It also implies that changes in anchor choices by a small number of countries can have large and rapid effects on the international monetary system. Other factors found to be related to anchor choice include the symmetry of output shocks and the currency denomination of liabilities.
The emerging system at the European level can be conceptualized as a pattern of relations among member states that tends to be reproduced despite disturbances in individual trajectories. The Markov property is used as an indicator of... more
The emerging system at the European level can be conceptualized as a pattern of relations among member states that tends to be reproduced despite disturbances in individual trajectories. The Markov property is used as an indicator of systemness in the distribution. The individual trajectories of nations participating in the European Monetary System are assessed using an information theoretical model that is consistent with the Markov property in the multivariate case. Economic and monetary integration are analysed using independent data sets. Increasing integration can be retrieved in both of these dimensions, notably since the currency crises of 1992 and 1993. However, the dynamics for countries which have strongly coupled their currency to the German Mark are different from those which did not. Additionally, developments in inflation and exchange rates at the European level are assessed in relation to global developments.
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Research Interests: Economics, Probability, Sampling, Correlation, Arithmetic, and 15 moreEquation, Cost of Capital, Autocorrelation, Sample Size, Capacity Utilization, Phillips curve, Counting, Output Gap, Standard Error, Production Function, Extrapolation, Random Sample, Normal Distribution, Confidence Interval, and potential output
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... Frances Hutchinson works at Bradford University. She has taught eco-nomics in the UK, Zambia and Sierra Leone. ... Edith Kuiper is researcher at the Department of Economics, University of Amsterdam, and the Tinbergen Institute. ...
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Research Interests: Finance, Economics, Econometrics, Time Series, Applied Economics, and 12 morePublic expenditure, Business and Management, Public Debt, South Eastern Europe, Dutch Disease, South-Eastern European History, Purchasing Power Parity, Economic systems, Real Exchange Rate, Net Foreign Assets, Driving force, and Behavioral equilibrium exchange rate
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Kenneth S. Rogoff, Aasim M. Husain, Ashoka Mody, ... Evolution and Performance of Exchange Rate Regimes 1 ... Prepared by Kenneth S. Rogoff, Aasim M. Husain, Ashoka Mody, Robin Brooks, and Nienke Oomes ... This Working Paper should not be... more
Kenneth S. Rogoff, Aasim M. Husain, Ashoka Mody, ... Evolution and Performance of Exchange Rate Regimes 1 ... Prepared by Kenneth S. Rogoff, Aasim M. Husain, Ashoka Mody, Robin Brooks, and Nienke Oomes ... This Working Paper should not be reported as ...
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... Barbara E. Hopkins received her PhD in economics from the University of Maryland. She is currently Assistant Professor of Economics at Wright State University in Dayton, Ohio. ... We are indebted to the efforts of our co-editors:... more
... Barbara E. Hopkins received her PhD in economics from the University of Maryland. She is currently Assistant Professor of Economics at Wright State University in Dayton, Ohio. ... We are indebted to the efforts of our co-editors: Susan Feiner, Not-burga Ott and Zafiris Tzannatos. ...
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Abstract Conditional on choosing a pegged exchange rate regime, what determines the currency to which countries peg or “anchor” their exchange rate? This paper aims to answer this question using a panel multinomial logit framework,... more
Abstract Conditional on choosing a pegged exchange rate regime, what determines the currency to which countries peg or “anchor” their exchange rate? This paper aims to answer this question using a panel multinomial logit framework, covering more than 100 countries for the period 1980-1998. We find that trade network externalities are a key determinant of anchor currency choice, implying that
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The emerging system at the European level can be conceptualized as a pattern of relations among member states that tends to be reproduced despite disturbances in individual trajectories. The Markov property is used as an indicator of... more
The emerging system at the European level can be conceptualized as a pattern of relations among member states that tends to be reproduced despite disturbances in individual trajectories. The Markov property is used as an indicator of systemness in the distribution. The individual trajectories of nations participating in the European Monetary System are assessed using an information theoretical model that is consistent with the Markov property in the multivariate case. Economic and monetary integration are ...