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International Risk Sharing And Currency Unions
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Book Synopsis International Risk Sharing and Currency Unions by : Mr.Etienne B. Yehoue
Download or read book International Risk Sharing and Currency Unions written by Mr.Etienne B. Yehoue and published by INTERNATIONAL MONETARY FUND. This book was released on 2005-05-01 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper explores income and consumption smoothing patterns among the member countries of each of the CFA zones-the CEMAC2 and the WAEMU3-during the period 1980-2000. I find that for the CEMAC, only about 15 percent of shocks to GDP are smoothed through the standard channels (that is, capital market, credit market, and remittances). On the other hand, I find that 44 percent of shocks are smoothed via foreign aid from France, and 5 percent via central bank contributions, while reserves pooling provides no shock smoothing. For the WAEMU, I find that only 13 percent of shocks are smoothed through the standard channels, while 63 percent are smoothed via foreign aid from France, 7 percent via central bank contributions, and no smoothing via reserves pooling. I compare these results with the risksharing pattern in the Unites States. I argue that creating public venture capital at a regional level might help promote free capital flows within each zone and alleviate the apparently insufficient degree of risk-sharing observed through the standard channels.
Book Synopsis Risk Sharing in Currency Unions by : Wilhelm K. Kohler
Download or read book Risk Sharing in Currency Unions written by Wilhelm K. Kohler and published by . This book was released on 2021 with total page 43 pages. Available in PDF, EPUB and Kindle. Book excerpt: International risk sharing insulates consumption from country-specific business-cycle fluctuations. This matters for countries in currency unions who lack monetary autonomy. In the spirit of Mundell, we formally integrate migration as a distinct channel into the standard framework used to quantify risk sharing. Comparing the euro area and the US we find that migration contributes significantly to risk sharing across US states, but not across the euro area. We also present survey evidence showing that migration rates are about 20 times higher in the US. The overall amount of risk sharing in the US is higher by a factor of two.
Book Synopsis The Common Currency Channel of Risk Sharing by : David Lindequist
Download or read book The Common Currency Channel of Risk Sharing written by David Lindequist and published by . This book was released on 2022 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: I propose a novel channel of international risk sharing: the common currency channel. I theoretically show how the central bank of a currency union can use the common currency to insure member countries against consumption risk from idiosyncratic productivity shocks. A trade-off between risk sharing and moral hazard emerges: a central bank which enables risk sharing induces countries to free ride on each other's production efforts. Monetary policy determines current account imbalances that are financed through the central bank rather than through the transfer of marketable assets. Optimal policy is contingent on the realization of aggregate production and on the severity of the underlying moral hazard friction. Revisiting European Central Bank policies during the Eurocrisis between 2008 and 2014, I find that the common currency channel accounts for up to 60% of risk sharing among Eurozone countries in the early stages of the Eurocrisis.
Book Synopsis Currency Unions and International Integration by : Andrew Rose
Download or read book Currency Unions and International Integration written by Andrew Rose and published by . This book was released on 2001 with total page 56 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Risk Sharing Through Capital Gains by : Faruk Balli
Download or read book Risk Sharing Through Capital Gains written by Faruk Balli and published by . This book was released on 2011 with total page 25 pages. Available in PDF, EPUB and Kindle. Book excerpt: We estimate channels of international risk sharing between European Monetary Union (EMU), European Union, and other OECD countries 1992-2007. We focus on risk sharing through savings, factor income flows, and capital gains. Risk sharing through factor income and capital gains was close to zero before 1999 but has increased since then. Risk sharing from capital gains, at about 6 percent, is higher than risk sharing from factor income flows for European Union countries and OECD countries. Risk sharing from factor income flows is higher for Euro zone countries, at 14 percent, reflecting increased international asset and liability holdings in the Euro area.
Book Synopsis International Risk-sharing and the Exchange Rate by : Michael B. Devereux
Download or read book International Risk-sharing and the Exchange Rate written by Michael B. Devereux and published by . This book was released on 2001 with total page 52 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Financial Integration and Consumption Risk Sharing in East Asia by : Soyoung Kim
Download or read book Financial Integration and Consumption Risk Sharing in East Asia written by Soyoung Kim and published by 대외경제정책연구원. This book was released on 2003 with total page 54 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis International Risk Sharing and European Monetary Union by : Bent E. Srensen
Download or read book International Risk Sharing and European Monetary Union written by Bent E. Srensen and published by . This book was released on 1998 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Monetary Unions and Hard Pegs by : Volbert Alexander
Download or read book Monetary Unions and Hard Pegs written by Volbert Alexander and published by OUP Oxford. This book was released on 2004-03-25 with total page 400 pages. Available in PDF, EPUB and Kindle. Book excerpt: Financial services with global reach are becoming ever more important in the conduct and organization of the trade and investment of nations, and currencies that lack international standing lose out in this business. The result of financial development has been destabilizing currency and portfolio substitution — in favour of international currencies and against local ones. This book analyses formal approaches to overcoming monetary divisions within countries and within integrating regions, focusing on the consequences of monetary union for trade among union members and their financial development and stability. The authors discuss hard pegs such as those attempted by the currency board of Argentina, outright dollarization, such as in Ecuador, and multilateral monetary union, as in Europe, the least reversible form of monetary union and the most powerful elixir of financial integration and trade. The political classes and central banks in most countries have been reluctant to admit the market- and technology-driven forces of currency consolidation, much less yield to them. International financial institutions too are still in the habit of proffering advice about national monetary and exchange-rate policies on the assumption that getting rid of both is not even an option. Emerging-market countries, in particular, have to choose between retaining what independent monetary means they still have — and can safely use in the presence of widespread liability dollarization and currency mismatches — and formally replacing the domestic with an international currency to reduce exposure to debilitating financial crises. In concrete investigations of this choice, this volume shows that monetary union deserves a much more sympathetic hearing.
Book Synopsis Regional Vs. Global Risk Sharing in East Asia by : Soyoung Kim
Download or read book Regional Vs. Global Risk Sharing in East Asia written by Soyoung Kim and published by KIEP. This book was released on 2004 with total page 54 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis The Euro Area Crisis by : Davide Furceri
Download or read book The Euro Area Crisis written by Davide Furceri and published by International Monetary Fund. This book was released on 2013-09-25 with total page 34 pages. Available in PDF, EPUB and Kindle. Book excerpt: The aim of this paper is to assess the effectiveness of risk sharing mechanisms in the euro area and whether a supranational fiscal risk sharing mechanism could insure countries against very severe downturns. Using an unbalanced panel of 15 euro area countries over the period 1979-2010, the results of the paper show that: (i) the effectiveness of risk sharing mechanisms in the euro area is significantly lower than in existing federations (such as the U.S. and Germany) and (ii) it falls sharply in severe downturns just when it is needed most; (iii) a supranational fiscal stabilization mechanism, financed by a relatively small contribution, would be able to fully insure euro area countries against very severe, persistent and unanticipated downturns.
Book Synopsis Toward a Monetary Union in the East African Community by : Mr.Paulo Drummond
Download or read book Toward a Monetary Union in the East African Community written by Mr.Paulo Drummond and published by International Monetary Fund. This book was released on 2015-07-20 with total page 58 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines how susceptible East African Community (EAC) economies are to asymmetric shocks, assesses the value of the exchange rate as a shock absorber for these countries, and reviews adjustment mechanisms that would help ensure a successful experience under a common currency. The report draws on analysis of recent experiences and examines likely future changes in the EAC economies.
Book Synopsis International Risk Sharing and Currency Unions by : Etienne B. Yehoue
Download or read book International Risk Sharing and Currency Unions written by Etienne B. Yehoue and published by . This book was released on 2005 with total page 30 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper explores income and consumption smoothing patterns among the member countries of each of the CFA zones-the CEMAC and the WAEMU-during the period 1980-2000. I find that for the CEMAC, only about 15 percent of shocks to GDP are smoothed through the standard channels (that is, capital market, credit market, and remittances). On the other hand, I find that 44 percent of shocks are smoothed via foreign aid from France, and 5 percent via central bank contributions, while reserves pooling provides no shock smoothing. For the WAEMU, I find that only 13 percent of shocks are smoothed through the standard channels, while 63 percent are smoothed via foreign aid from France, 7 percent via central bank contributions, and no smoothing via reserves pooling. I compare these results with the risksharing pattern in the Unites States. I argue that creating public venture capital at a regional level might help promote free capital flows within each zone and alleviate the apparently insufficient degree of risk-sharing observed through the standard channels.
Book Synopsis An Analysis of Transfer Risk in Comparison to Sovereign Risk by : Philipp Hauger
Download or read book An Analysis of Transfer Risk in Comparison to Sovereign Risk written by Philipp Hauger and published by GRIN Verlag. This book was released on 2006-10-21 with total page 92 pages. Available in PDF, EPUB and Kindle. Book excerpt: Master's Thesis from the year 2006 in the subject Economics - Monetary theory and policy, grade: 1,6, Frankfurt School of Finance & Management, language: English, abstract: Transfer risk is the risk that a non-sovereign entity, which is able and willing to service its foreign currency obligations, cannot obtain the required currency or cannot transfer this money to the receiver abroad. This transfer inability is caused by the imposition of restrictions on convertibility or capital transfers by the government. Transfer risk applies to all types of international investments, especially in emerging market countries. Due to this, it is more important than ever in these days of globalization. The New Basel Capital Accords require the consideration of transfer risk, too. The author Philipp Hauger describes the different types of risk occurring in international borrowings and investments. The political and corporate determinants of transfer risk are examined. The book illustrates the reasons why monetary unions reduce the risk of a transfer event, even though they have no influence on the sovereign risk. In addition, the author details how transfer risk is assessed by international professionals and describes two interesting approaches to estimate transfer risk in a quantitative way. This book is intended for professionals and students who are interested in the risks of international investments and for everybody working in international business, who has to differentiate between sovereign risk and the risk of a corporate default.
Book Synopsis Three Essays on Imbalances in a Monetary Union by : Ida Maria Hjortsø
Download or read book Three Essays on Imbalances in a Monetary Union written by Ida Maria Hjortsø and published by . This book was released on 2012 with total page 144 pages. Available in PDF, EPUB and Kindle. Book excerpt: This thesis investigates the implications of imbalances within a monetary union. In the first chapter, I study how international financial frictions lead to international imbalances and affect optimal fiscal policy in a two-country, two-good DSGE model of a monetary union. I show that the presence of international imbalances affects the optimal conduct of cooperative fiscal policies when the traded goods are complements. Government expenditures optimally play a cross-country risk sharing role which is in conflict with the domestic stabilization role: optimal fiscal policy consists in setting government expenditures such as to reduce international imbalances at the expense of higher domestic inefficiencies. In the second chapter, I assess the implications of strategic fiscal policy interactions in a two-country DSGE model of a monetary union with nominal rigidities and international financial frictions. I show that the fiscal policy makers face an incentive to set fiscal policy such as to switch the terms of trade in their favour. This incentive results in a Nash equilibrium characterized by excessive inflation differentials as well as sub-optimally high current account imbalances within the monetary union. There are thus non-negligeable welfare losses associated with strategic fiscal policy making in a monetary union. The third chapter investigates empirically the degree of risk sharing in the European Economic and Monetary Union (EMU), using two different methods. The first measure relates to the capacity of consumption smoothing. This measure indicates that risk sharing is rather low and that the introduction of the common currency did not lead to higher intra-EMU risk sharing. The second measure is based on the welfare losses associated with deviations from full risk sharing. These welfare losses have fallen since the introduction of the common currency. However, this is mostly due to changes in macroeconomic risk - not to changes in risk sharing per se.
Book Synopsis Revisiting the Economic Case for Fiscal Union in the Euro Area by : Mr.Helge Berger
Download or read book Revisiting the Economic Case for Fiscal Union in the Euro Area written by Mr.Helge Berger and published by International Monetary Fund. This book was released on 2018-02-20 with total page 63 pages. Available in PDF, EPUB and Kindle. Book excerpt: The paper makes an analytical contribution to the revived discussion about the euro area’s institutional setup. After significant progress during the euro crisis, the drive to complete Europe’s Economic and Monetary Union (EMU) had stalled, and the way forward will benefit from an in-depth look at the conceptual issues raised by the evolution and architecture of Europe, and the tradeoffs involved. A thorough look at the underlying economic issues suggests that in the long run, EMU will benefit from progressing along three mutually supporting tracks: introduce more fiscal risk sharing, helping to make the sovereign “no bailout” rule credible; complementary financial sector reforms to delink sovereigns and banks; and more effective rules to discourage moral hazard. This evolution would ensure that financial markets provide incentives for fiscal discipline. Introducing more fiscal union comes with myriad legal, technical, operational, and political problems, raising questions well beyond the remit of economics. But without decisive progress to foster fiscal risk sharing, EMU will continue to face existential risks.
Book Synopsis Essays on Money and Banking, Macroeconomics, and Political Economy by : David Lindequist
Download or read book Essays on Money and Banking, Macroeconomics, and Political Economy written by David Lindequist and published by . This book was released on 2020 with total page 131 pages. Available in PDF, EPUB and Kindle. Book excerpt: This thesis consists of three self-contained articles. In the first article "The Common Currency Channel of Risk Sharing", I propose a new channel of international risk sharing: the common currency channel. I show theoretically that the central bank of a currency union can use the common currency to insure member countries against consumption risk from idiosyncratic productivity shocks. A trade-off between risk-sharing and moral hazard emerges: a central bank which enables risk sharing induces countries to free ride on each other's production efforts. I study this trade-off and derive rules for a central bank striking the optimal balance between insurance and incentives. Monetary policy determines current account imbalances that are financed through the central bank. Optimal policy is contingent on the realization of aggregate production. The central bank should lower its policy rate in response to a decrease in aggregate production to provide insurance through the common currency. Revisiting European Central Bank policies during the Eurocrisis between 2008 and 2014, I interpret the buildup of TARGET2 balances as risk sharing through the common currency. I find that this channel accounts for up to 60% of risk sharing among Eurozone countries in the early stages of the Eurocrisis. I conclude that the common currency can be a substitute for risk sharing through fiscal integration. The second article "Riding the Cycle" (joint work with Christoph Wolf) studies the interplay between the business cycle and financial contracting. If the success probability of an investment project is increasing in both the business cycle state and the borrower's effort, then the borrower can free-ride on the cycle. In a model of financial contracting with moral hazard, we show that this free-riding generates procyclical agency costs. The overall effect of business cycle conditions on credit availability depends on how changes in agency costs compare to cycle-induced changes in the net present value of investment projects. In a dynamic extension, we endogenize the business cycle as a function of the output realized through past credit contracts. The dynamic economy has a unique stable steady state. If agency frictions in the economy are sufficiently strong, a small shock to the business cycle can cause the economy to fluctuate between business cycle ups and downs. The cycles are induced by the interplay of the negative agency cost effects and the positive output effects of the business cycle. Our theory sheds new light upon the observed patterns of secured and unsecured credit in U. S. data from 1981 to 2012. The third article "Diversity Taxes" (joint work with Saumya Deojain) studies how social conflict generated through cultural diversity affects public policy. In our model, social conflict arises when diverse groups impose negative consumption externalities on each other. These externalities can be mitigated by a government which transforms cultural consumption into public good consumption. We show that in such a framework, 'diversity taxes' arise as a policy tool to regulate the externalities from the cultural consumption of diverse groups. We link the size of such taxes to characteristics of the underlying distribution of cultural groups as well as to the type of government (majority and minority). In contrast to much of the literature, our analysis predicts that more diverse communities have a bigger government size as measured by local taxes per capita. Using U. S. city and county data from 1990, we are able to verify this prediction. We find strong evidence for the existence of sizeable 'diversity taxes' in U. S. localities after controlling for a variety of socioeconomic and demographic indicators. We further document statistically significant relationships between characteristics of the group size distribution and local taxes per capita which are in line with our hypothesized link between cultural diversity, negative externalities, and taxation.
