IMF Working Paper Series
Опубликовано на портале: 10-12-2003Evan Tanner IMF Working Paper Series. 1998. No. 98/117 .
Ex-post deviations from uncovered interest parity (UIP)-realized differences between dollar returns on identical assets of different currencies-equal the real interest differencial plus real exchange rate growth. Among industrialized countries, UIP deviations are largely explained by unanticipated real exchange rate growth, but among developing countries, real interest differencial are "where the action is". This observations is due to the greater variabiliti of inflation in developing countries, but may also stem from higher and more variable risks and capital controls in these countries. Also among developing countries with moderate inflation, offsetting comovements of real interest differencials and real exchange rate growth support the sticky-price hypothesis.
Опубликовано на портале: 10-12-2003Peter Clarke, Ronald MacDonald IMF Working Paper Series. 1998. No. 98/67.
This paper compares two approaches for examining the extent to which a country's actual real effective exchange rate is consistent with economic fundamentals: the PEER approach, which involves calculating the real exchange rate that equates the current account at full employment with sustainable net capital flows, and the BEER approach, which uses econometric methods to establish a behavioral link between the real rate and relevant economic variables. An exchange rate model is estimated for the G-3 currencies to provide illustrative comparisons of BEERs and FEERs.
Опубликовано на портале: 22-12-2003Tito Cordella, Isabel Grilo IMF Working Paper Series. 1998. No. 98/48 .
This paper uses a vertical differentiation duopoly framework to analyze firms. relocation decisions when the removal either of trade barriers or of restrictions on capital outflows or inflows (globalization) allows them to serve the domestic market through foreign plants employing cheaper foreign labor. The paper addresses two issues. First, it tries to explain which firms, within a specific industry, have the stronger incentives in relocating their production facilities in low-wage countries. It shows that such incentives are higher for the firm producing the variety that would have a larger market share if the two goods were sold at their marginal cost. Second, it assesses the welfare consequences of the decision of domestic firms to serve the domestic market through foreign plants. More precisely, it compares domestic welfare under autarchy and under globalization. The recognition of the consequences of relocation on unemployment allows to explicitly take into account the associated variations in workers. surplus, when performing the welfare analysis. In this second-best world, when the complete liberalization of trade and capital flows leads to the relocation of the whole industry, autarchy is strictly better, on domestic welfare terms, than globalization. However, when relocation is a dominant strategy for one (and only one) firm, globalization may unambiguously be welfare improving. Finally, and somehow against the common wisdom, the paper shows that the welfare cost of relocation is lower, the lower is the level of the foreign wage.
Опубликовано на портале: 16-12-2003Oleh Havrylyshyn, Hassan M. Al-Atrash IMF Working Paper Series. 1998. No. 98/22.
During the Soviet period, trade of the economies of the region was highly inward-oriented; this was particularly marked for most of the republics of the USSR, but a bit less so for Russia. Independence and transition to the market should have resulted in two changes: increased external trade relative to GDP as the central planning restrictions on foreign trade were lifted; and strong reorientation of trade to the rest of the world to achieve a more normal geographic distribution as central plan directives were removed, with the extent and speed of such geographic diversification affected by the degree of structural reform achieved. The paper tests these hypotheses. For most countries in central Europe, as well as a few others, one observes a trade openness ratio similar to or at least approaching that of market economies of comparable size and level of development. Using a variant of the gravity model, the study also finds that geographic diversification to the European Union is greater the closer is geographic proximity and the more progress a country makes in structural reforms. The model is used to simulate the effects of more ambitious structural reforms. The results suggest that even for countries most advanced in reforms, one might still expect as much as an 8-10 percentage point increase in the level of exports to the European Union, and more for others. There are several important policy implications from these results. First, much remains to be done in terms of liberalization and structural reform in most transition economies, which will in turn promote further restructuring and resource reallocation and trade diversification. Second, greater access to European Union markets may give an added boost to reorientation of trade. Third, while the results suggest the importance of differentiating competitive exchange rates, the limited period of time precludes differentiating fully the effects of exchange rate stability from those of financial stability.
Опубликовано на портале: 22-12-2003Qaizar Hussain, R. Scott Hacker IMF Working Paper Series. 1998. No. 98/84.
This paper uses a three-country duopoly model to examine the effects of lowered trade barriers when a new entrant wants to join a preferential trading bloc. There are two firms: a small-country firm and a large-country firm within the bloc; three markets: two within the bloc and one (the new entrant) outside the bloc. The model analyzes the effects of reduced tariffs on the quantities produced and sold, the prices charged, and the profits earned by each firm. Under rising marginal costs the results are in line with the main results of Casella (1996). Like Casella's results, this paper's results also generally show greater gains for the firm in the small country than for the firm in the large country, although Casella uses a monopolistic competition model. The main results of the paper (under increasing marginal cost) are as follows. First, the small-country firm will export more to the external country than the large-country firm, though each firm produces more for its own domestic market. Second, as a result of a reduction in tariffs, the export share of the large-country firm will increase relative to that of the small-country firm. Finally, profits will improve more for the small-country firm than for the large-country firm if tariffs decline in the external country. An important implication can be derived from our results. Firms in small countries such as Austria, Portugal, and Sweden should not necessarily be alarmed when the Eastern European countries join the European Union. This is especially true if these firms have substantial market power in the output market relative to large-country firms. For instance, it is quite likely that Volvo and Saab from Sweden may enjoy greater increases in profits than their German counterparts, Volkswagen and Mercedes-Benz, owing to a reduction in import tariffs in Poland or Estonia.