This paper provides a synthesis of explanations for why the natural rate of interest, r*, has fallen over the last several decades. Demographic factors, declining productivity, slower output growth, and increasing inequality likely all have been important factors. Perhaps less recognized is the role of increasing global demand for safe assets, particularly by foreign investors. Suggestive empirical evidence is presented showing that foreign demand for U.S. safe assets, particularly government-provided assets, has increased dramatically, and may now be playing a much larger role in the determination of U.S. interest rates than in the past. In addition, the buildup before the 2007-2009 financial crisis of quasi-government and privately-supplied safe assets, held by both domestic and foreign investors, rendered the financial system more vulnerable to shocks that adversely affected the perceived degree of “safeness” they provided.
We examine the effects of unconventional and conventional monetary policy announcements on the value of the dollar using high-frequency intraday data. Identifying monetary policy surprises from changes in interest rate futures prices in narrow windows around policy announcements, we find that surprise easings in monetary policy since the crisis began have had significant effects on the value of the dollar. We document that these changes are comparable to the effects of conventional policy changes prior to the crisis.
Published Articles (Refereed Journals and Volumes)
We examine the effects of unconventional monetary policy surprises on the value of the dollar using high-frequency intraday data and contrast them with the effects of conventional policy tools. Identifying monetary policy surprises from changes in interest rate future prices in narrow windows around policy announcements, we find that monetary policy surprises since the Federal Reserve lowered its policy rate to the effective lower bound have had larger effects on the value of the dollar. In particular, we document that the impact on the dollar has been roughly three to four times that following conventional policy changes prior to the 2007-08 financial crisis.
Currency Unions and Regional Trade Agreements: EMU and EU Effects of Trade
Comparative Economic Studies 59(2), June 2017, 194-209
The effects of the European Economic and Monetary Union (EMU) and European
Union (EU) on trade are separately estimated using an empirical gravity model.
Employing a panel approach with both time-varying country and dyadic fixed
effects on a large span of data (across both countries and time), it is found that
EMU and EU each significantly boosted exports. EMU expanded European trade by
40% for the original members, while the EU increased trade by almost 70%.
Newer members have experienced even higher trade as a result of joining the EU,
but more time is necessary to see the effects of their joining EMU.
Conditional PPP and Real Exchange Rate Convergence in the Euro Area
Journal of International Money and Finance 73, May 2017, 78-92 | With Bergin and Wu
While economic theory highlights the usefulness of flexible exchange rates in promoting adjustment in international relative prices, flexible exchange rates also can be a source of destabilizing shocks. We find that when countries joining the euro currency union abandoned their national exchange rates, the adjustment of real exchange rates toward their long-run equilibrium surprisingly became faster. To investigate, we distinguish between differing rates of purchasing power parity (PPP) convergence conditional on alternative shocks, which we refer to as “conditional PPP.” We find that the loss of the exchange rate as an adjustment mechanism after the introduction of the euro was more than compensated by the elimination of the exchange rate as a source of shocks, in combination with faster adjustment in national prices. These findings support claims that flexible exchange rates are not necessary to promote long-run international relative price adjustment.
Currency Unions and Trade: A Post-EMU Reassessment
European Economic Review 87, August 2016, 78-91 | With Rose
In our European Economic Review (2002) paper, we used pre-1998 data on countries participating in and leaving currency unions to estimate the effect of currency unions on trade using (then-) conventional gravity models. In this paper, we use a variety of empirical gravity models to estimate the currency union effect on trade and exports, using recent data which includes the European Economic and Monetary Union (EMU). We have three findings. First, our assumption of symmetry between the effects of entering and leaving a currency union seems reasonable in the data. Second, our preferred methodology indicates that EMU has boosted exports by around 50%. While other estimation techniques yield different results, a panel approach with both time-varying country and dyadic fixed effects on a large span of data (across both countries and time) seems to deliver insensitive and reliable results. Third, different currency unions have different trade effects.
Mussa Redux and Conditional PPP
Journal of Monetary Economics 68, November 2014, 101-114 | With Bergin and Wu
The extreme persistence of real exchange rates found commonly in post-Bretton Woods data does not hold in the preceding fixed exchange rate period, when the half-life was roughly half as large in our sample. This finding supports sticky price models as an explanation for real exchange rate behavior, extending the classic argument of Mussa (1986) from a focus on short-run volatility to long-run dynamics. Two thirds of the rise in real exchange rate variance observed across exchange rate regimes is attributable to greater persistence of responses to shocks, including greater price stickiness, rather than to greater variance of shocks themselves.
Asset Class Diversification and Delegation of Responsibilities between Central Banks and Sovereign Wealth Funds
International Journal of Central Banking 10 (3), September 2014, 129-161 | With Aizenman
This paper presents a model comparing the degree of asset class diversification abroad by a central bank and a sovereign wealth fund. We show that if the central bank manages its foreign asset holdings in order to meet balance of payments needs, particularly in reducing the probability of sudden stops in foreign capital inflows, it will place a high weight on holding safer foreign assets. In contrast, if the sovereign wealth fund, acting on behalf of the Treasury, maximizes the expected utility of a representative domestic agent, it will opt for relatively greater holding of more risky foreign assets. We also show how the diversification differences between the strategies of the bank and sovereign wealth fund are affected by the government’s delegation of responsibilities and by various parameters of the economy, such as the volatility of equity returns and the total amount of public foreign assets available for management.
China’s Financial Linkages with Asia and the Global Financial Crisis
Journal of International Money and Finance, July 2013 | With Hutchison
This paper presents empirical evidence on asset market linkages between China and Asia and how these linkages have shifted during and after the global financial crisis of 2008-2009. We find only weak cross-country linkages in longer-term interest rates, but much stronger linkages in equity markets. This finding is consistent with the greater development and liberalization of equity markets relative to bond markets in China, as well as increasing business and trade linkages in the region. We also find that the strength of the correlation of equity prices changes between China and other Asia countries increased markedly during the crisis and has remained high in recent years. We attribute this development to greater “attentiveness” of international investors to China’s role as a source and destination of equity finance during the crisis rather than to any greater financial deepening and liberalization, as China did not implement any major policy measures during this period. By contrast, the transmission of U.S. equity returns to Asian countries decreased after the crisis.
The Micro-Macro Disconnect of Purchasing Power Parity
Review of Economics and Statistics, May 2013 | With Bergin and Wu
This paper reconciles the persistence of aggregate real exchange rates with the faster adjustment of international relative prices in microeconomic data. Adjustment to purchasing power parity
deviations in aggregated data is not just a slower version of adjustment to the law of one price in microeconomic data, as arbitrage occurs in different markets, in response to distinct
macroeconomic and microeconomic shocks. When half-lives are estimated conditional on macro shocks, micro relative prices exhibit just as much persistence as aggregate real exchange rates.
These results challenge theories of real exchange rate persistence based on sticky prices and on heterogeneity across goods.
China’s Financial Openness and Asset Return Linkages in East Asia
In The Oxford Handbook of the Economics of the Pacific Rim, Ch. 25, ed. by Inderjit Kaur and Nirvikar Singh | Oxford: Oxford University Press, 2013 | With Hutchison
Central Bank Announcements of Asset Purchases and the Impact on Global Financial and Commodity Markets
Journal of International Money and Finance 31(8), December 2012, 2078-2101 | With Leduc
We present evidence on the effects of large-scale asset purchases by the Federal Reserve and the Bank of England since 2008. We show that announcements about these purchases led to lower long-term interest rates and depreciations of the U.S. dollar and the British pound on announcement days, while commodity prices generally declined despite this more stimulative financial environment. We suggest that LSAP announcements likely involved signaling effects about future growth that led investors to downgrade their U.S. growth forecasts lowering long-term U.S. yields, depreciating the value of the U.S. dollar, and triggering a decline in commodity prices. Moreover, our analysis illustrates the importance of controlling for market expectations when assessing these effects. We find that positive U.S. monetary surprises led to declines in commodity prices, even as long-term interest rates fell and the U.S. dollar depreciated. In contrast, on days of negative U.S. monetary surprises, i.e. when markets evidently believed that monetary policy was less stimulatory than expected, long-term yields, the value of the dollar, and commodity prices all tended to increase.
The Illusive Quest: Do International Capital Controls Contribute to Currency Stability?
International Review of Economics and Finance 20(1), January 2011, 59-70 | With Hutchison
We investigate the effectiveness of capital controls in insulating economies from currency crises, focusing in particular on both direct and indirect effects of capital controls and how these relationships may have changed over time in response to global financial liberalization and the greater mobility of international capital. We predict the likelihood of currency crises using standard macroeconomic variables and a probit equation estimation methodology with random effects. We employ a comprehensive panel data set comprised of 69 emerging market and developing economies over 1975-2004. Both standard and duration-adjusted measures of capital control intensity (allowing controls to “depreciate” over time) suggest that capital controls have not effectively insulated economies from currency crises at any time during our sample period. Maintaining real GDP growth and limiting real overvaluation are critical factors preventing currency crises, not capital controls. However, the presence of capital controls greatly increases the sensitivity of currency crises to changes in real GDP growth and real exchange rate overvaluation, making countries more vulnerable to changes in fundamentals. Our model suggests that emerging markets weathered the 2007-2008 crisis relatively well because of strong output growth and exchange rate flexibility that limited overvaluation of their currencies.
Collateral Damage: Trade Disruption and the Economic Impact of War
The Review of Economics and Statistics 92(1), February 2010, 102-127 | With Taylor
Conventional wisdom in economic history suggests that conflict between countries can be enormously disruptive of economic activity, especially international trade. We study the effects of war on bilateral trade with available data extending back to 1870. Using the gravity model, we estimate the contemporaneous and lagged effects of wars on the trade of belligerent nations and neutrals, controlling for other determinants of trade, as well as the possible effects of reverse causality. We find large and persistent impacts of wars on trade, national income, and global economic welfare. We also conduct a general equilibrium comparative statics exercise that indicates costs associated with lost trade might be at least as large as the conventionally measured direct costs of war, such as lost human capital, as illustrated by case studies of World Wars I and II.
Endogenous Tradability and Some Macroeconomic Implications
Journal of Monetary Economics 56(8), November 2009, 1086-1095 | With Bergin
While nontraded goods play an important role in many open economy macroeconomic models, these models have difficulty explaining the low volatility in the relative price of nontraded goods. In contrast to macroeconomic convention, this paper argues that the share of nontraded goods is endogenous, a time-varying product of macroeconomic shocks and trade costs that are heterogeneous across goods. A simple open economy model demonstrates that trade cost heterogeneity and a time varying margin of tradedness dramatically reduces the volatility of nontraded prices. This also reduces the ability of real exchange rate adjustments to dampen current account imbalances.
Sterilization, Monetary Policy, and Global Financial Integration
Review of International Economics 17(4), September 2009, 777-801 | With Aizenman
This paper investigates the changing pattern and efficacy of sterilization within emerging market countries as they liberalize markets and integrate with the world economy. We estimate the marginal propensity to sterilize foreign asset accumulation associated with net balance of payments inflows, across countries, and over time. We find that the extent of sterilization of foreign reserve inflows has risen in recent years to varying degrees in Asia as well as in Latin America, consistent with greater concerns about the potential inflationary impact of reserve inflows. We also find that sterilization depends on the composition of balance of payments inflows.
Navigating the Trilemma: Capital Flows and Monetary Policy in China
Journal of Asian Economics 20(3), May 2009, 205-224 | With Hutchison
In recent years China has faced an increasing trilemma–how to pursue an independent domestic monetary policy and limit exchange rate flexibility, while at the same time facing large and growing international capital flows. This paper analyzes the impact of the trilemma on China’s monetary policy as the country liberalizes its goods and financial markets and integrates with the world economy. It shows how China has sought to insulate its reserve money from the effects of balance of payments inflows by sterilizing
through the issuance of central bank liabilities. However, we report empirical results indicating that sterilization dropped precipitously in 2006 in the face of the ongoing massive buildup of international reserves, leading to a surge in reserve money growth. We estimate a vector error correction model linking the surge in China’s reserve money to broad money, real GDP, and the price level. We use this model to explore the inflationary implications of different policy scenarios. Under a scenario of continued rapid reserve money growth (consistent with limited sterilization of foreign exchange reserve accumulation) and strong economic growth, the model predicts a rapid increase in inflation. A model simulation using an extension of the framework that incorporates recent increases in bank reserve requirements also implies a rapid rise in inflation. By contrast, model simulations incorporating a sharp slowdown in economic growth such as that seen in late 2008 and 2009 lead to less inflation pressure even with a substantial buildup in international reserves.
Sovereign Wealth Funds: Stylized Facts about their Determinants and Governance
International Finance 12(3), Winter 2009, 351-386 | With Aizenman
Concerns about the implications of foreign investments by sovereign wealth funds (SWFs) stem in large part from apprehensions about the objectives and governance quality of these institutions. This paper contributes to better understanding of the stylized facts of sovereign wealth funds by providing statistical analysis of a range of characteristics of SWFs, including the motivation for their establishment as well as their size, governance, and effect on reserve management behavior. Specifically, it estimates what factors foster the establishment of SWFs as well as affect their size. It also investigates the extent to which the governance and transparency of individual SWFs correlate with domestic and global governance practices. Lastly, it analyzes how asset accumulation by SWFs may affect central bank holdings of official reserves.
Pegged Exchange Rate Regimes–A Trap?
Journal of Money, Credit, and Banking 40(4), June 2008, 817-835 | With Aizenman
We analyze the role of an exchange rate peg as a commitment mechanism to achieve inflation stability when multiple equilibria are possible. We show that there are ex ante large gains from choosing a more conservative regime not only in order to mitigate inflation bias from time inconsistency but also to avoid high inflation equilibria. In these circumstances, using a pegged exchange rate as an anti-inflation commitment device can create a “trap” whereby the regime initially confers gains in anti-inflation credibility but ultimately results in an exit occasioned by a big enough adverse real shock that creates large welfare losses to the economy.
A Model of Endogenous Nontradability and its Implications for the Current Account
Review of International Economics 15(5), November 2007, 916-931 | With Bergin
This paper studies how nontraded goods limit the ability of a country to finance current account deficits. It uses an intertemporal model of the current account for a small open economy where goods are endogenously nontraded due to explicit trade costs. The economy has an endowment of two goods with differing trade costs, either of which can be traded or nontraded in equilibrium. The model implies that current account deficits impose a cost, in the form of raising the effective interest rate in the country. The findings differ from some recent studies: first, in that the interest rate rises even for countries with modest current account deficits; secondly, the interest rate cost eventually reaches an upper bound as current account deficits grow, and progressively more nontraded goods become traded to service the debt. Panel regression analysis of interest rate and current account data are consistent with our conclusions.
Tradability, Productivity, and International Economic Integration
Journal of International Economics 73(1), September 2007, 128-151 | With Bergin
This paper develops a model of endogenously tradable goods to study the implications of international integration for price dispersion and pricing to market. A distinctive feature of the model is heterogeneity in both trade costs and productivity. The model highlights the role of heterogeneity in shaping how new entrants at the extensive margin differ from incumbent traders, thereby giving extensive margin movements distinctive implications relative to the intensive margin. In particular, the model predicts that international integration mainly along the extensive margin should be associated with a more limited degree of price convergence. This prediction finds support in cross-sectional regressions on European data and offers insight into recent integration episodes.
Global Price Dispersion: Are Prices Converging or Diverging?
Journal of International Money and Finance 26(5) , September 2007, 703-729 | With Bergin
This paper documents significant time-variation in the degree of global price convergence over the last two decades. In particular, there appears to be a general U-shaped pattern with price dispersion first falling and then rising in recent years, a pattern which is remarkably robust across country groupings and commodity groups. This time-variation is difficult to explain in terms of the standard gravity equation variables common in the literature, as these tend not to vary much over time or have not risen in recent years. However, regression analysis indicates that this time-varying pattern coincides well with oil price fluctuations, which are clearly time-varying and have risen substantially since the late 1990s. As a result, this paper offers new evidence on the role of transportation costs in driving international price dispersion.
Currency Crises, Capital Account Liberalization, and Selection Bias
Review of Economics and Statistics 88(4), November 2006, 698-714 | With Guo and Hutchison
Are countries with unregulated capital flows more vulnerable to currency crises? Efforts to answer this question properly must control for self-selection bias, because countries with liberalized capital accounts may also have sounder economic policies and institutions that make them less likely to experience crises. We employ a matching and propensity-score methodology to address this issue in a panel analysis of developing countries. Our results suggest that, after controlling for sample selection bias, countries with liberalized capital accounts experience a lower likelihood of currency crises.
Productivity, Tradability, and the Long-Run Price Puzzle
Journal of Monetary Economics 53(8), November 2006, 2041-2066 | With Bergin and Taylor
Long-run cross-country price data exhibit a puzzle. Today, richer countries exhibit higher price levels than poorer countries, a stylized fact usually attributed to the Balassa-Samuelson (BS) effect. But looking back 50 years, this effect virtually disappears from the data. What is often assumed to be a universal property is actually quite specific to recent times, emerging a half century ago and growing steadily over time. What might potentially explain this historical pattern? We develop an updated BS model inspired by recent developments in trade theory, where a continuum of goods are differentiated by productivity, and where tradability is endogenously determined. Firms experiencing productivity gains are more likely to become tradable and crowd out firms not experiencing productivity gains. As a result the usual BS assumption–that productivity gains be concentrated in the traded goods sector–emerges endogenously, and the BS effect on relative price levels likewise evolves gradually over time.
Military Expenditure, Threats, and Growth
Journal of International Trade and Economic Development 15(2), June 2006, 129-155 | With Aizenman
This paper clarifies one of the puzzling results of the economic growth literature: the impact of military expenditure is frequently found to be nonsignificant or negative, yet most countries spend a large fraction of their GDP on defense and the military. We start by empirical evaluation of the nonlinear interactions between military expenditure, external threats, corruption, and other relevant controls. While growth falls with higher levels of military spending, given the values of the other independent variables, we show that military expenditure in the presence of threats increases growth. We explain the presence of these nonlinearities in an extended version of Barro and Sala-i-Martin (1995), allowing the dependence of growth on the severity of external threats, and on the effective military expenditure associated with these threats.
Capital Controls and Exchange Rate Instability in Developing Countries
Journal of International Money and Finance 24(3), April 2005, 387-412 | With Hutchison
A large literature on the appropriate sequencing of financial liberalization suggests that removing capital controls prematurely may contribute to currency instability. This paper investigates whether legal restrictions on international capital flows are associated with greater currency stability. We employ a comprehensive panel data set of 69 developing economies over the 1975-1997 period, identifying 160 currency crises. We control for macroeconomic, political, and institutional characteristics that influence the probability of a currency crisis, employ alternative measures of restrictions on international payments, and account for possible joint causality between the likelihood of a currency attack and the imposition of capital controls. We find evidence that restrictions on capital flows do not effectively insulate economies from currency problems; rather, countries with less restrictive capital controls and more liberalized regimes appear to be less prone to speculative attacks.
Does a Currency Union Affect Trade? The Time Series Evidence
European Economic Review 46(6), June 2002, 1125-1151 | With Rose
Does leaving a currency union reduce international trade? We answer this question using a large annual panel data set covering 217 countries from 1948 through 1997. During this sample a large number of countries left currency unions; they experienced economically and statistically significant declines in bilateral trade after accounting for other factors. Assuming symmetry, we estimate that a pair of countries that starts to use a common currency experiences a near doubling in bilateral trade.
Is Money Still Useful for Policy in East Asia?
In Inflation Targeting: Theories, Empirical Models, and Implementation in Pacific Basin Economies, Proceedings of 14th Pacific Basin Central Bank Conference | Bank of Korea, 2002 | With Moreno
Since the East Asian crises of 1997, a number of East Asian economies
have allowed greater exchange rate flexibility and abandoned monetary targets in favor of inflation targeting, apparently because the perceived usefulness of money as a predictor of inflation (i.e., the information content of money) has fallen. In this paper, we discuss factors that are likely to have influenced the stability of the relationship between money and inflation, particularly in the 1990s, and then assess this relationship in a set of East Asian economies. We focus on (1) the stability of the behavior of the velocity of money; (2) the ability of money growth to predict inflation as measured by tests of Granger causality, and (3) the contribution of money to the variance of the forecast error of inflation. We find evidence that, with a few exceptions in which capital flows were particularly large, velocity remained
generally stable, as did the relationship between money growth and
inflation. However, the contribution of money to inflation forecast errors
fell considerably in the 1990s, reducing its value as an information variable
to monetary authorities.
Fixed versus Flexible Exchange Rates: Is It Possible to Manage in the Middle?
In Financial Markets and Policies in East Asia, ed. by de Brouwer | New York: Routledge Press, 2001
This paper reviews the theoretical and empirical basis for the view that intermediate (“soft”) exchange rate regimes have become increasingly less feasible. It shows that the proportion of countries with hard currency pegs or flexible exchange rates has increased over time, and that the countries remaining in the “shrinking middle” typically must restrict capital movements. The paper also assesses the feasibility of alternative exchange rate arrangements for the developing countries of East Asia. This paper was presented to the conference on “Financial Markets and Policies in East Asia” at the Australian National University, Canberra, September 4-5, 2000.
Financial Crises in Emerging Markets: An Introductory Overview
In Financial Crises in Emerging Markets, ed. by Glick, Moreno, and Spiegel | New York: Cambridge University Press, 2001. 1-34 | With Moreno and Spiegel
Banking and Currency Crises: How Common Are Twins?
In Financial Crises in Emerging Markets, ed. by Glick, Moreno, and Spiegel | New York: Cambridge University Press, 2001 | With Hutchison
The coincidence of banking and currency crises associated with the Asian
financial crisis has drawn renewed attention to causal and common factors linking the two phenomena. In this paper, we analyze the incidence and underlying causes of banking and currency crises in 90 industrial and developing countries over the 1975-1997 period. We measure the individual and joint (“twin”) occurrence of bank and currency crises and assess the extent to which each type of crisis provides information about the likelihood of the other.
We find that the twin crisis phenomenon is most common in financially
liberalized emerging markets. The strong contemporaneous correlation between currency and bank crises in emerging markets is robust, even after controlling for a host of macroeconomic and financial structure variables and possible simultaneity bias. We also find that the occurrence of banking crises provides a good leading indicator of currency crises in emerging markets. The converse does not hold, however, as currency crises are not a useful leading indicator of the onset of future banking crises. We conjecture that the openness of emerging markets to international capital flows, combined with a liberalized financial structure, make them particularly vulnerable to twin crises.
Foreign Reserve and Money Dynamics with Asset Portfolio Adjustment: International Evidence
Journal of International Financial Markets, Institutions, and Money 10(3-4), December 2000, 229-247 | With Hutchison
In this paper we argue that more complete modeling of foreign exchange intervention and sterilization dynamics is necessary when there are adjustment costs to changing private portfolios and/or the central bank attempts to balance longer-run monetary control against short-term exchange rate objectives. We show that measured correlations between domestic credit and foreign asset changes, often interpreted as ‘sterilization coefficients,’ may be misleading because they vary with the pattern of disturbances as well as private agent and central bank behavior. We assess the empirical significance of this issue by estimating vector error correction models of the domestic and foreign asset components of the monetary base for Japan and Germany. In both countries, we find that that the impact of foreign exchange intervention on domestic credit falls markedly after several months, implying that the degree of sterilization decreases over time. However, the monetary base remained largely insulated as foreign asset positions were subsequently ‘unwound.’
Contagion and Trade: Why Are Currency Crises Regional?
Journal of International Money and Finance 18(4), August 1999 | With Rose
Money and Credit, Competitiveness, and Currency Crises in Asia and Latin America
In Monetary Policy and the Structure of the Current Account. Proceedings of 13th Pacific Basin Central Bank Conference | Mexico City: Bank of Mexico, 1999 | With Moreno
Origins of the Asian Financial Crisis: Impulses and Propagation Mechanisms
In The Asian Financial Crisis: Origins, Implications, and Solutions, ed. by Hunter, Kaufman, and Krueger | Boston: Kluwer Academic Publishers, 1999
Contagion and Trade: Explaining the Incidence and Intensity of Currency Crises
In The Asian Financial Crises: Causes, Contagion, and Consequences, ed. by Agenor, Miller, Vines, and Weber | New York: Cambridge University Press, 1999 | With Rose
Is Pegging the Exchange Rate a Cure for Inflation? East Asian Experiences
In Exchange Rate Policies for Emerging Market Economies, ed. by Sweeney, Wihlborg, and Willett | Westview Press, 1999 | With Moreno and Hutchison
Exchange Rate Regimes and International Trade
In International Trade and Finance: New Frontiers for Research, Essays in Honor of Peter B. Kenen, ed. by Cohen | New York: Cambridge University Press, 1997 | With Wihlborg
Real Exchange Rate Effects of Monetary Disturbances under Different Degrees of Exchange Rate Flexibility: An Empirical Analysis
Journal of International Economics 38(3-4), May 1995 | With Kretzmer and Wihlborg
Global versus Country-Specific Productivity Shocks and the Current Account
Journal of Monetary Economics 35(1), February 1995 | With Rogoff
Capital Flows and Monetary Policy in East Asia
In Monetary and Exchange Rate Management with International Capital Mobility: Experiences of Countries and Regions along the Pacific Rim. Proceedings of 11th Pacific Basin Central Bank Conference | Hong Kong: Hong Kong Monetary Authority, 1995 | With Moreno
Foreign Exchange Intervention and Sterilization Dynamics in Japan
In International Financial Markets in Northeast Asia: Assessments and Prospects, ed. by Nam and Pyo | Korea Development Institute and Institute of World Economy, 1994
Monetary Policy, Intervention, and Exchange Rates in Japan
In Exchange Rate Policy and Interdependence: Perspectives from the Pacific Basin, ed. by Glick and Hutchison | New York: Cambridge University Press, 1994 | With Hutchison
Fiscal Policy in Monetary Unions: Implications for Europe
Open Economies Review 4(1), January 1993 | With Hutchison
Fiscal Constraints and Incentives with Monetary Coordination: Implications for Europe 1992
In Financial Regulation and Monetary Arrangements after 1992, ed. by Wihlborg, Fratianni, and Willett | Amsterdam: North-Holland, 1992 | With Hutchison
Equilibrium Adjustment with Endogenous Information and Inventories
International Economic Review, November 1991 | With Wihlborg
New Results in Support of the Fiscal Policy Ineffectiveness Proposition
Journal of Money, Credit, and Banking, August 1990 | With Hutchison
Real Exchange Rate Effects of Monetary Shocks under Fixed and Flexible Exchange Rates
Journal of International Economics, May 1990 | With Wihlborg
Financial Liberalization in the Pacific Basin: Implications for Real Interest Rate Linkages.
Journal of the Japanese and International Economies, March 1990 | With Hutchison
Does Exchange Rate Appreciation ‘Deindustrialize’ the Open Economy? A Critique of U.S. Evidence
Economic Inquiry, January 1990 | With Hutchison
Money Demand and Off-Balance-Sheet Liquidity: Empirical Analysis and Implications for Monetary Policy
Journal of Accounting, Auditing, and Finance, Spring 1989 | With Plaut
Financial Market Changes and Monetary Policy in Pacific Basin Countries
In Monetary Policy in Pacific Basin Countries, ed. by Cheng | Boston: Kluwer Academic Publishers, 1988
Monetary Policy Changes in Pacific Basin Countries
In Monetary Policy in Pacific Basin Countries, ed. by Cheng | Boston: Kluwer Academic Publishers, 1988 | With Cheng
The Role of Information Acquisition and Financial Markets in International Macroeconomic Adjustment
Journal of International Money and Finance, September 1986 | With Wihlborg
Market Neutrality Conditions and Valuation of a Foreign Affiliate
Journal of Business Finance and Accounting, Summer 1986
The Costs and Benefits of Foreign Borrowing: A Survey of Multi-Period Models
Journal of Development Studies, January 1986 | With Kharas
Economic Perspectives on Foreign Borrowing and Debt Repudiation: An Analytic Literature Review
In Monograph Series in Finance and Economics No. 4 | New York: Saloman Brothers Center for the Study of Financial Institutions, New York University, 1986
Optimal Borrowing and Investment with an Endogenous Lending Constraint
Journal of Banking and Finance, Studies in Banking and Finance 3, 1986 | With Kharas
Price and Output Adjustment, Inventory Flexibility, and Cost and Demand Disturbances
Canadian Journal of Economics, August 1985 | With Wihlborg
Price Determination in a Competitive Industry with Costly Information and a Production Lag
Rand Journal of Economics, Spring 1985 | With Wihlborg
The Geometry of Asset Adjustment with Adjustment Costs
Journal of Financial Research, Winter 1984
R&D Effort and U.S. Exports and Foreign Affiliate Production of Manufactures
The Economic and Monetary Union in Europe has recently been the source of a lot of pain. Its economic benefits often seem a lot harder to measure. This column reconsiders earlier opinions on the trade effects of currency unions using the latest data and methodologies. It suggests the euro has at least a mildly stimulating effect on exports. However, the switches and reversals across methodologies do not make allowances for any bold statements.
Prospects for Asia and the Global Economy: Conference Summary
In Prospects for Asia and the Global Economy, ed. by Reuven Glick and Mark Spiegel | Federal Reserve Bank of San Francisco, 2014. 3-13 | With Spiegel
This chapter highlights the principal issues raised at the 2013 Asia Economic Policy Conference on “Prospects for Asia and the Global Economy,” held at the Federal Reserve Bank of San Francisco on November 3-5, 2013
Models of Currency Crises
In The Evidence and Impact of Financial Globalization, Ch. 33, ed. by Gerard Caprio | London: Elsevier, 2012. 485-498 | With Hutchison
A currency crisis is a speculative attack on the foreign exchange value of a currency, resulting in a sharp depreciation or forcing the authorities to sell foreign exchange reserves and raise domestic interest rates to defend the currency. This article discusses analytical models of the causes of currency and associated crises, presents basic measures of the incidence of crises, evaluates the accuracy of empirical models in predicting crises, and reviews work measuring the consequences of crises on the real economy. Currency crises have large measurable costs on the economy, but our ability to predict the timing and magnitude of crises is limited by our theoretical understanding of the complex interactions between macroeconomic fundamentals, investor expectations and government policy.
For many observers, one central flaw of the Eurozone is that countries lose the ability to manipulate their exchange rates to suit their needs. But this article argues that flexible exchange rates are often more likely to make things worse than make things better.
This column provides evidence that there is great deal of difference between the governance standards of the economies in which sovereign wealth funds have been established and the standards of the industrial economies in which they are seeking to invest. It also discusses how the expansion of asset holdings of sovereign wealth funds may reduce official reserve holdings.
Macroeconomic Effects of International Trade
In The New Palgrave Dictionary of Economics, 2nd edition, ed. by Blume and Durlauf | Palgrave Macmillan, 2008
Comments on “Searching for Non-Monotonic Effects of Fiscal Policy: New Evidence” by Giavazzi, Jappelli, Pagano, and Benedetti
In Monetary and Economic Studies, Bank of Japan | October 2005, 2005
Discussion of “Assessing Currency Implications of Intra and Inter-Regional Shocks: Application to Australasia” by Grimes
Journal of Asian Economics 16(3), June 2005, 398-402
Book review: “Capital Flows and Crises” by Eichengreen
Journal of Asian Business, 2004
Book review: “Financial Liberalization: How Far, How Fast?” ed. by Caprio, Honohan, and Stiglitz
Journal of Economic Literature, September 2003
Book review: “Changes in Exchange Rates in Rapidly Developing Economies,” ed. by Ito and Krueger
Review of International Economics, May 2002
Book review: “International Financial Contagion,” ed. by Claessens and Forbes
Journal of Economic Literature, 2002
Comments on “Do Currency Regimes Matter in the 21st Century? An Overview” by Fujiki and Otani
Monetary and Economic Studies, Bank of Japan, 2002
A Regional Contagion
Risk Magazine, February 2000 | With Rose
Prospects for Asia
Briefing for the U.S. Trade Deficit Review Commission, November 1999
The East Asian Miracle: Growth Because of Government Intervention and Protectionism or in Spite of It?
Business Economics, April 1997 | With Moreno
Comment on “Financial Sector Opportunities for the Asia Pacific Region: The Case for Canadian Banks” by Dean
In The Asia Pacific Region in the Global Economy: A Canadian Perspective, ed. by Harris | Calgary: University of Calgary Press, 1996
Comment on “Is a Yen Bloc Emerging?” by Frankel and Wei
In Economic Cooperation and Challenges in the Pacific, Joint U.S.-Korea Academic Studies 5 | Korean Economic Institute, 1995
Book review: “Macroeconomic Theory and Stabilization Policy” by Buiter
Journal of International Economics, 1992
U.S. International Service Transactions: Their Structure and Growth