In recent years the discussion of the role played by reserve currencies in the world economy has reached a new level. Problems caused by the domination of a single reserve currency have not yet been resolved and it remains unclear when and how they will be solved in the future. At the same time, the discussion quite often does not include necessary theoretical foundations for the different alternatives. In this article we try to develop a rigorous foundation for the concept of a regional reserve currency, to present theoretical arguments for the factors relating to the formation of reserve currencies and to estimate the potential of the Russian ruble as a regional reserve currency.
{"title":"Prospects of the Russian Ruble as a Regional Reserve Currency: Theoretical Approach","authors":"S. Narkevich, P. Trunin","doi":"10.2139/ssrn.2210411","DOIUrl":"https://doi.org/10.2139/ssrn.2210411","url":null,"abstract":"In recent years the discussion of the role played by reserve currencies in the world economy has reached a new level. Problems caused by the domination of a single reserve currency have not yet been resolved and it remains unclear when and how they will be solved in the future. At the same time, the discussion quite often does not include necessary theoretical foundations for the different alternatives. In this article we try to develop a rigorous foundation for the concept of a regional reserve currency, to present theoretical arguments for the factors relating to the formation of reserve currencies and to estimate the potential of the Russian ruble as a regional reserve currency.","PeriodicalId":259955,"journal":{"name":"ERN: Open Macroeconomics in Transition Economics (Topic)","volume":"52 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2013-02-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"131852329","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The rate of growth in both, exports and imports in recent months are ranging around zero. In October, Russia for the first time took part in the General Council of the World Trade Organization (WTO) as a full member.
{"title":"Russia's Foreign Trade in October 2012","authors":"N. Volovik","doi":"10.2139/SSRN.2182531","DOIUrl":"https://doi.org/10.2139/SSRN.2182531","url":null,"abstract":"The rate of growth in both, exports and imports in recent months are ranging around zero. In October, Russia for the first time took part in the General Council of the World Trade Organization (WTO) as a full member.","PeriodicalId":259955,"journal":{"name":"ERN: Open Macroeconomics in Transition Economics (Topic)","volume":"132 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2012-10-20","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"129476093","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The present research deals with the effect capital flows have on Russia’s macroeconomic indicators. Numerous nations have recently completed the so-called liberalization of the capital and financial account, i.e. have lifted restrictions on capital flows. That is why looking into the impact capital flows have on an economy’s development has formed a universal subject of economic research. Because of this, we have evaluated the impact of capital flows in and out of RF over the period between 1999 and 2007 against the background of the gradual liberalization of the capital and financial account of Russia’s balance of payments on the country’s macroeconomic indicators.
{"title":"An Analysis of the Impact of the Balance of Payments' Capital Account on Macroeconomic Processes in Russian Federation","authors":"P. Trunin","doi":"10.2139/ssrn.2121239","DOIUrl":"https://doi.org/10.2139/ssrn.2121239","url":null,"abstract":"The present research deals with the effect capital flows have on Russia’s macroeconomic indicators. Numerous nations have recently completed the so-called liberalization of the capital and financial account, i.e. have lifted restrictions on capital flows. That is why looking into the impact capital flows have on an economy’s development has formed a universal subject of economic research. Because of this, we have evaluated the impact of capital flows in and out of RF over the period between 1999 and 2007 against the background of the gradual liberalization of the capital and financial account of Russia’s balance of payments on the country’s macroeconomic indicators.","PeriodicalId":259955,"journal":{"name":"ERN: Open Macroeconomics in Transition Economics (Topic)","volume":"53 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2012-08-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"123770157","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The 2007-2009 global financial crisis demonstrated the need for effective systemic risk measurement and regulation. This paper proposes a straightforward approach for estimating the systemic funding liquidity risk in a banking system and identifying systemically critical banks. Focusing on the surplus of highly liquid assets above due payments, we find systemic funding liquidity risk can be expressed as the distance of the aggregate liquidity surplus from its current level to its critical value. Calculations are performed using simulated distribution of the aggregate liquidity surplus determined using Independent Component Analysis. The systemic importance of banks is then assessed based on their contribution to variation of the liquidity surplus in the system. We apply this methodology to the case of Russia, an emerging economy, to identify the current level of systemic funding liquidity risk and rank banks based on their systemic relevance.
{"title":"Measuring Systemic Funding Liquidity Risk in the Russian Banking System","authors":"Irina K. Andrievskaya","doi":"10.2139/ssrn.2086316","DOIUrl":"https://doi.org/10.2139/ssrn.2086316","url":null,"abstract":"The 2007-2009 global financial crisis demonstrated the need for effective systemic risk measurement and regulation. This paper proposes a straightforward approach for estimating the systemic funding liquidity risk in a banking system and identifying systemically critical banks. Focusing on the surplus of highly liquid assets above due payments, we find systemic funding liquidity risk can be expressed as the distance of the aggregate liquidity surplus from its current level to its critical value. Calculations are performed using simulated distribution of the aggregate liquidity surplus determined using Independent Component Analysis. The systemic importance of banks is then assessed based on their contribution to variation of the liquidity surplus in the system. We apply this methodology to the case of Russia, an emerging economy, to identify the current level of systemic funding liquidity risk and rank banks based on their systemic relevance.","PeriodicalId":259955,"journal":{"name":"ERN: Open Macroeconomics in Transition Economics (Topic)","volume":"22 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2012-06-07","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"116619191","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
In this paper we study the determinants of gross capital flows, project the size of China’s international investment positions in 2020 and analyse the implications for the renminbi real exchange rates. We assume in this exercise that the renminbi will have largely achieved capital account convertibility by the end of this decade, a timetable consistent with recent proposals by the People’s Bank of China. Our analysis shows that China’s gross international investment positions would grow significantly, and inflows and outflows would become much more balanced. The private sector would turn its net liability position into a balanced position, and the official sector would reduce its net asset position significantly, relative to the country’s GDP. Because of the increasing importance of private sector foreign claims and the decreasing importance of official foreign reserves, China would be able to earn higher net investment incomes from abroad. Overall, China would continue to be a net creditor, with the net foreign asset position as a share of GDP remaining largely stable through this decade. These findings suggest that the renminbi real exchange rate would not be particularly sensitive to capital account liberalisation as capital flows are expected to be two-sided. The renminbi real exchange rate would likely be on a path of moderate appreciation as China is expected to maintain a sizeable growth differential with its trading partners.
{"title":"How Would Capital Account Liberalisation Affect China’s Capital Flows and the Renminbi Real Exchange Rates?","authors":"D. He, Lillian Cheung, Wenlang Zhang, Tommy T. Wu","doi":"10.2139/ssrn.2042315","DOIUrl":"https://doi.org/10.2139/ssrn.2042315","url":null,"abstract":"In this paper we study the determinants of gross capital flows, project the size of China’s international investment positions in 2020 and analyse the implications for the renminbi real exchange rates. We assume in this exercise that the renminbi will have largely achieved capital account convertibility by the end of this decade, a timetable consistent with recent proposals by the People’s Bank of China. Our analysis shows that China’s gross international investment positions would grow significantly, and inflows and outflows would become much more balanced. The private sector would turn its net liability position into a balanced position, and the official sector would reduce its net asset position significantly, relative to the country’s GDP. Because of the increasing importance of private sector foreign claims and the decreasing importance of official foreign reserves, China would be able to earn higher net investment incomes from abroad. Overall, China would continue to be a net creditor, with the net foreign asset position as a share of GDP remaining largely stable through this decade. These findings suggest that the renminbi real exchange rate would not be particularly sensitive to capital account liberalisation as capital flows are expected to be two-sided. The renminbi real exchange rate would likely be on a path of moderate appreciation as China is expected to maintain a sizeable growth differential with its trading partners.","PeriodicalId":259955,"journal":{"name":"ERN: Open Macroeconomics in Transition Economics (Topic)","volume":"4 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2012-04-18","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"127905023","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
China, the second largest economy in the world after the US, has started the process to internationalize its currency, the renminbi (RMB), to become a global reserve currency. To this end, the offshore market for RMB-denominated bonds (dim sum bond) market in Hong Kong has been established to promote the use of RMB in investment outside China. This market has grown rapidly to a size of over 186.8 billion yuan with 329 issues in less than five years. It is likely that this dim sum bond market will continue to grow because of China’s efforts to internationalize its currency as a national policy.
{"title":"The Chinese Offshore Renminbi-Denominated Bonds: Dim Sum Bonds","authors":"Hung-Gay Fung, Derrick Tzau, Jot K. Yau","doi":"10.2139/SSRN.2080636","DOIUrl":"https://doi.org/10.2139/SSRN.2080636","url":null,"abstract":"China, the second largest economy in the world after the US, has started the process to internationalize its currency, the renminbi (RMB), to become a global reserve currency. To this end, the offshore market for RMB-denominated bonds (dim sum bond) market in Hong Kong has been established to promote the use of RMB in investment outside China. This market has grown rapidly to a size of over 186.8 billion yuan with 329 issues in less than five years. It is likely that this dim sum bond market will continue to grow because of China’s efforts to internationalize its currency as a national policy.","PeriodicalId":259955,"journal":{"name":"ERN: Open Macroeconomics in Transition Economics (Topic)","volume":"38 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2012-02-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"128440161","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2011-08-01DOI: 10.1111/j.1468-0106.2011.00548.x
H. Ching, C. Hsiao, Shui Ki Wan, Tongsan Wang
A panel data method is used to evaluate the impact of China's accession to the WTO. Time‐series data for China, Australia, Austria, Canada, Denmark, Finland, France, Germany, the UK, Hong Kong, Singapore, Korea, Japan, the Philippines, Indonesia, Malaysia, Thailand, the USA and Taiwan are used to construct the growth path that what would have been followed had there been no entry by China to the WTO. We find that from 2002 to 2007, accession to the WTO raised China's real economic growth rate by 2.4%, its export growth rate by 13.2% and its import growth rate by 18.89% a year.
{"title":"Economic Benefits of Globalization: The Impact of Entry to the WTO on China'S Growth","authors":"H. Ching, C. Hsiao, Shui Ki Wan, Tongsan Wang","doi":"10.1111/j.1468-0106.2011.00548.x","DOIUrl":"https://doi.org/10.1111/j.1468-0106.2011.00548.x","url":null,"abstract":"A panel data method is used to evaluate the impact of China's accession to the WTO. Time‐series data for China, Australia, Austria, Canada, Denmark, Finland, France, Germany, the UK, Hong Kong, Singapore, Korea, Japan, the Philippines, Indonesia, Malaysia, Thailand, the USA and Taiwan are used to construct the growth path that what would have been followed had there been no entry by China to the WTO. We find that from 2002 to 2007, accession to the WTO raised China's real economic growth rate by 2.4%, its export growth rate by 13.2% and its import growth rate by 18.89% a year.","PeriodicalId":259955,"journal":{"name":"ERN: Open Macroeconomics in Transition Economics (Topic)","volume":"15 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2011-08-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"116717919","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
A growing number of papers have studied positive and normative implications of financial frictions in DSGE models. We contribute to this literature by studying the welfare-based monetary policy in a two-country model characterized by financial frictions, alongside a number of key features, like capital accumulation, non-traded goods and foreign-currency debt denomination. We compare the cooperative Ramsey monetary policy with standard policy benchmarks (e.g. PPI stability) as well as with the optimal Ramsey policy in a currency area. We show that the two-country perspective offers new insights on the trade-offs faced by the monetary authority. Our main results are the following. First, strict PPI targeting (nearly optimal in our model if credit frictions are absent) becomes excessively procyclical in response to positive productivity shocks in the presence of financial frictions. The related welfare losses are non-negligible, especially if financial imperfections interact with nontradable production. Second, (asymmetric) foreign currency debt denomination affects the optimal monetary policy and has important implications for exchange rate regimes. In particular, the larger the variance of domestic productivity shocks relative to foreign, the closer the PPI-stability policy is to the optimal policy and the farther is the currency union case. Third, we find that central banks should allow for deviations from price stability to offset the effects of balance sheet shocks. Finally, while financial frictions substantially decrease attractiveness of all price targeting regimes, they do not have a significant effect on the performance of a monetary union agreement.
{"title":"Financial Frictions and Optimal Monetary Policy in an Open Economy","authors":"Marcin Kolasa, G. Lombardo","doi":"10.2139/ssrn.1904841","DOIUrl":"https://doi.org/10.2139/ssrn.1904841","url":null,"abstract":"A growing number of papers have studied positive and normative implications of financial frictions in DSGE models. We contribute to this literature by studying the welfare-based monetary policy in a two-country model characterized by financial frictions, alongside a number of key features, like capital accumulation, non-traded goods and foreign-currency debt denomination. We compare the cooperative Ramsey monetary policy with standard policy benchmarks (e.g. PPI stability) as well as with the optimal Ramsey policy in a currency area. We show that the two-country perspective offers new insights on the trade-offs faced by the monetary authority. Our main results are the following. First, strict PPI targeting (nearly optimal in our model if credit frictions are absent) becomes excessively procyclical in response to positive productivity shocks in the presence of financial frictions. The related welfare losses are non-negligible, especially if financial imperfections interact with nontradable production. Second, (asymmetric) foreign currency debt denomination affects the optimal monetary policy and has important implications for exchange rate regimes. In particular, the larger the variance of domestic productivity shocks relative to foreign, the closer the PPI-stability policy is to the optimal policy and the farther is the currency union case. Third, we find that central banks should allow for deviations from price stability to offset the effects of balance sheet shocks. Finally, while financial frictions substantially decrease attractiveness of all price targeting regimes, they do not have a significant effect on the performance of a monetary union agreement.","PeriodicalId":259955,"journal":{"name":"ERN: Open Macroeconomics in Transition Economics (Topic)","volume":"3 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2011-05-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"127662572","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The focal theme of this research paper is to investigate the effect of macroeconomic parameters on the capital structure of Pakistani firms. According to the best of our knowledge this is the first study of its kind in Pakistan and it will open new horizons of research in this area ultimately helping practitioners and academicians. Previous researches in the context of Pakistan have taken firm specific variables only while this study considers macroeconomic factors besides company specific variables. A panel data (for a period of 2003 to 2009) for KSE-I 00 (non-financial firms) has been analyzed by using SUR (Seemingly Unrelated Regression) model. The main findings of this study elucidate that macroeconomic variables have varying effects as far as capital structure's measurement is concerned. The market size (stock market development) has a positive effect on debt choice of Pakistani firms. Bank size is directly related with long term debt to equity of these firms. The correlation between inflation rate and financial leverage (long term debt to equity as well) is negative, whereas, it has a positive relation with external financing ratio. GDP per capita is inversely related with all debt ratios. SBP discount rate is though negative but statistically insignificantly related with all debt ratios. All firm level variables, like ROE, ROA, Q ratio, Assets tangibility, Dividend payout policy and risk proved to be significant with all debt ratios. Hence, this research study supports the existing literature related to capital structure, chiefly in the case of company specific variables.
{"title":"Effect of Macroeconomic Factors on Capital Structure Decisions of Firm-Evidence from a Developing Country","authors":"Qurrat-ul-Ain, Sharif Ullah Jan, Muhammad Rafiq","doi":"10.22547/BER/3.1.5","DOIUrl":"https://doi.org/10.22547/BER/3.1.5","url":null,"abstract":"The focal theme of this research paper is to investigate the effect of macroeconomic parameters on the capital structure of Pakistani firms. According to the best of our knowledge this is the first study of its kind in Pakistan and it will open new horizons of research in this area ultimately helping practitioners and academicians. Previous researches in the context of Pakistan have taken firm specific variables only while this study considers macroeconomic factors besides company specific variables. A panel data (for a period of 2003 to 2009) for KSE-I 00 (non-financial firms) has been analyzed by using SUR (Seemingly Unrelated Regression) model. The main findings of this study elucidate that macroeconomic variables have varying effects as far as capital structure's measurement is concerned. The market size (stock market development) has a positive effect on debt choice of Pakistani firms. Bank size is directly related with long term debt to equity of these firms. The correlation between inflation rate and financial leverage (long term debt to equity as well) is negative, whereas, it has a positive relation with external financing ratio. GDP per capita is inversely related with all debt ratios. SBP discount rate is though negative but statistically insignificantly related with all debt ratios. All firm level variables, like ROE, ROA, Q ratio, Assets tangibility, Dividend payout policy and risk proved to be significant with all debt ratios. Hence, this research study supports the existing literature related to capital structure, chiefly in the case of company specific variables.","PeriodicalId":259955,"journal":{"name":"ERN: Open Macroeconomics in Transition Economics (Topic)","volume":"51 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2011-04-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"126405564","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
If there is a negative terms of trade or financial shock leading to the deterioration in the balance of payments, there are two basic options for a country that has limited foreign exchange reserves. First, a country can maintain a fixed exchange rate (or even a currency board) and wait until the reduction of foreign exchange reserves leads to the reduction of money supply: this will drive domestic prices down and stimulate exports, raise interest rates and stimulate the inflow of capital, and finally will correct the balance of payments. Second, the country can allow the devaluation of national currency – flexible exchange rate will automatically bring the balance of payments back into the equilibrium. Because national prices are less flexible than exchange rates, the first type of adjustment is associated with the greater reduction of output. The empirical evidence on East European countries and other transition economies for 1998-99 period (outflow of capital after the 1997 Asian and 1998 Russian currency crises and slowdown of output growth rates) suggests that the second type of policy response (devaluation) was associated with smaller loss of output than the first type (monetary contraction). 2008-09 developments provide additional evidence for this hypothesis.
{"title":"To Devaluate or Not to Devalue? How East European Countries Responded to the Outflow of Capital in 1997-99 and in 2008-09","authors":"V. Popov","doi":"10.2139/ssrn.1764107","DOIUrl":"https://doi.org/10.2139/ssrn.1764107","url":null,"abstract":"If there is a negative terms of trade or financial shock leading to the deterioration in the balance of payments, there are two basic options for a country that has limited foreign exchange reserves. First, a country can maintain a fixed exchange rate (or even a currency board) and wait until the reduction of foreign exchange reserves leads to the reduction of money supply: this will drive domestic prices down and stimulate exports, raise interest rates and stimulate the inflow of capital, and finally will correct the balance of payments. Second, the country can allow the devaluation of national currency – flexible exchange rate will automatically bring the balance of payments back into the equilibrium. Because national prices are less flexible than exchange rates, the first type of adjustment is associated with the greater reduction of output. The empirical evidence on East European countries and other transition economies for 1998-99 period (outflow of capital after the 1997 Asian and 1998 Russian currency crises and slowdown of output growth rates) suggests that the second type of policy response (devaluation) was associated with smaller loss of output than the first type (monetary contraction). 2008-09 developments provide additional evidence for this hypothesis.","PeriodicalId":259955,"journal":{"name":"ERN: Open Macroeconomics in Transition Economics (Topic)","volume":"107 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2011-02-18","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"131773170","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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