Iván Kataryniuk, Víctor Mora-Bajén, Javier J. Pérez
Sovereign spreads within the European Monetary Union (EMU) arise because markets price-in heterogeneous country fundamentals, but also re-denomination risks, given the incomplete nature of EMU. This creates a permanent risk of financial fragmentation within the area. In this paper we claim that political decisions that signal commitment to safeguarding the adequate functioning of the euro area influence investors’ valuations. We focus on decisions conducive to enhancing the institutional framework of the euro area (“EMU deepening”). To test our hypothesis we build a comprehensive narrative of events (decisions) from all documents and press releases issued by the Council of the EU and the European Council during the period January 2010 to March 2020. We categorize the events as dealing with: (i) economic and financial integration; (ii) fiscal policy; (iii) bailouts. With our extremely rich narrative at hand, we conduct event-study regressions with daily data to assess the impact of events on sovereign bond yields and find that indeed decisions on financial integration drive down periphery spreads. Moreover, while decisions on key subjects present a robust effect, this is not the case with prior discussions on those subjects at the Council level. Finally, we show that the impacts arise from reductions in peripheral sovereign spreads, and not by the opposite movement in core countries. We conclude that EU policy-makers have at their disposal significant “political space” to reduce fragmentation and gain “policy space”.
{"title":"EMU Deepening and Sovereign Debt Spreads: Using Political Space to Achieve Policy Space","authors":"Iván Kataryniuk, Víctor Mora-Bajén, Javier J. Pérez","doi":"10.2139/SSRN.3769347","DOIUrl":"https://doi.org/10.2139/SSRN.3769347","url":null,"abstract":"Sovereign spreads within the European Monetary Union (EMU) arise because markets price-in heterogeneous country fundamentals, but also re-denomination risks, given the incomplete nature of EMU. This creates a permanent risk of financial fragmentation within the area. In this paper we claim that political decisions that signal commitment to safeguarding the adequate functioning of the euro area influence investors’ valuations. We focus on decisions conducive to enhancing the institutional framework of the euro area (“EMU deepening”). To test our hypothesis we build a comprehensive narrative of events (decisions) from all documents and press releases issued by the Council of the EU and the European Council during the period January 2010 to March 2020. We categorize the events as dealing with: (i) economic and financial integration; (ii) fiscal policy; (iii) bailouts. With our extremely rich narrative at hand, we conduct event-study regressions with daily data to assess the impact of events on sovereign bond yields and find that indeed decisions on financial integration drive down periphery spreads. Moreover, while decisions on key subjects present a robust effect, this is not the case with prior discussions on those subjects at the Council level. Finally, we show that the impacts arise from reductions in peripheral sovereign spreads, and not by the opposite movement in core countries. We conclude that EU policy-makers have at their disposal significant “political space” to reduce fragmentation and gain “policy space”.","PeriodicalId":269683,"journal":{"name":"PSN: Regional Monetary Union (Topic)","volume":"75 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-01-19","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"124475738","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}
Low inflation rates in the Euro Area raise the question of whether inflation is still credibly anchored to the Euro-system’s medium term target of below, but close to 2%. The purpose of this paper is twofold. On the one hand, we investigate why agents’ inflation expectations that inflation will remain in line with the target begin to falter. On the other hand, we want to study how the de-anchoring of expectations interacts with monetary policy determining whether the central bank is still able to achieve its target - and hence re-anchor inflation expectations - or whether the system drifts away towards the liquidity trap. Two are our main findings. The first is that large unfavourable shocks might lead agents to question their trust in resilience of the system, and to revise their expectations. If inflation expectations fall faster than the policy rate, and the zero lower bound is reached without correcting the interest-rate gap, the system converges to a new steady state - the “new normal” - with permanent negative gaps. The second is that a more aggressive monetary policy is ineffective both at the ZLB and above the ZLB, when the shock is large shocks and/or when the reactivity of inflation expectations is high enough. This last finding seems to support the necessity, in those conditions, to abandon conventional monetary policy and to switch to an aggressive reflationary policy that prevents the entrenchment of deflationary expectations.
{"title":"Monetary Policy, De-Anchoring of Inflation Expectations, and the 'New Normal'","authors":"Lucio Gobbi, Ronny Mazzocchi, R. Tamborini","doi":"10.2139/ssrn.3095889","DOIUrl":"https://doi.org/10.2139/ssrn.3095889","url":null,"abstract":"Low inflation rates in the Euro Area raise the question of whether inflation is still credibly anchored to the Euro-system’s medium term target of below, but close to 2%. The purpose of this paper is twofold. On the one hand, we investigate why agents’ inflation expectations that inflation will remain in line with the target begin to falter. On the other hand, we want to study how the de-anchoring of expectations interacts with monetary policy determining whether the central bank is still able to achieve its target - and hence re-anchor inflation expectations - or whether the system drifts away towards the liquidity trap. Two are our main findings. The first is that large unfavourable shocks might lead agents to question their trust in resilience of the system, and to revise their expectations. If inflation expectations fall faster than the policy rate, and the zero lower bound is reached without correcting the interest-rate gap, the system converges to a new steady state - the “new normal” - with permanent negative gaps. The second is that a more aggressive monetary policy is ineffective both at the ZLB and above the ZLB, when the shock is large shocks and/or when the reactivity of inflation expectations is high enough. This last finding seems to support the necessity, in those conditions, to abandon conventional monetary policy and to switch to an aggressive reflationary policy that prevents the entrenchment of deflationary expectations.","PeriodicalId":269683,"journal":{"name":"PSN: Regional Monetary Union (Topic)","volume":"89 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-01-03","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"128630882","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}
El acuerdo de la Union Monetaria Latina (UML), firmado en diciembre de 1865 por Francia, Italia, Belgica y Suiza, estandarizo la acunacion de monedas de oro y plata en los paises miembros y permitio la libre circulacion de las monedas nacionales en la Union. En un influyente estudio, Flandreau (2000) no encontro evidencia de un efecto positivo general de la UML sobre el comercio. En este trabajo se estiman los efectos de este acuerdo monetario sobre el comercio utilizando un modelo de gravedad, que tiene en cuenta, de forma explicita, las condiciones cambiantes en el entorno internacional que afectaron a los fundamentos economicos subyacentes a la UML (es decir, los limites a la acunacion de las monedas de plata en 1874) y sus disposiciones (es decir, la «clausula de liquidacion» de 1885). En este marco, el estudio prueba la existencia de efectos heterogeneos sobre el comercio bilateral dentro de la UML. En linea con Flandreau, no se encuentra un efecto significativo de la UML sobre el comercio. Sin embargo, la evidencia presentada apoya la hipotesis de que la UML tuvo efectos significativos sobre el comercio en el periodo 1865-1874. Estos efectos, no obstante, se concentraron en los flujos comerciales entre Francia y el resto de los miembros de la UML, siguiendo una estructura hub-and-spokes. Ademas, se encuentra evidencia de la existencia de una ruptura estructural a nivel de UML en 1874, que afecto a la evolucion de los flujos comerciales dentro de la Union.
{"title":"Currency Unions and Heterogeneous Trade Effects: The Case of the Latin Monetary Union","authors":"Jacopo Timini","doi":"10.2139/ssrn.3075149","DOIUrl":"https://doi.org/10.2139/ssrn.3075149","url":null,"abstract":"El acuerdo de la Union Monetaria Latina (UML), firmado en diciembre de 1865 por Francia, Italia, Belgica y Suiza, estandarizo la acunacion de monedas de oro y plata en los paises miembros y permitio la libre circulacion de las monedas nacionales en la Union. En un influyente estudio, Flandreau (2000) no encontro evidencia de un efecto positivo general de la UML sobre el comercio. En este trabajo se estiman los efectos de este acuerdo monetario sobre el comercio utilizando un modelo de gravedad, que tiene en cuenta, de forma explicita, las condiciones cambiantes en el entorno internacional que afectaron a los fundamentos economicos subyacentes a la UML (es decir, los limites a la acunacion de las monedas de plata en 1874) y sus disposiciones (es decir, la «clausula de liquidacion» de 1885). En este marco, el estudio prueba la existencia de efectos heterogeneos sobre el comercio bilateral dentro de la UML. En linea con Flandreau, no se encuentra un efecto significativo de la UML sobre el comercio. Sin embargo, la evidencia presentada apoya la hipotesis de que la UML tuvo efectos significativos sobre el comercio en el periodo 1865-1874. Estos efectos, no obstante, se concentraron en los flujos comerciales entre Francia y el resto de los miembros de la UML, siguiendo una estructura hub-and-spokes. Ademas, se encuentra evidencia de la existencia de una ruptura estructural a nivel de UML en 1874, que afecto a la evolucion de los flujos comerciales dentro de la Union.","PeriodicalId":269683,"journal":{"name":"PSN: Regional Monetary Union (Topic)","volume":"159 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2017-11-21","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"132871607","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}
Despite the general improvement in controlling price levels over the last two decades, a substantial number of the population in emerging market economies still save and borrow in foreign-denominated currencies. There are reasons to believe, however, that a high degree of financial dollarization presents obstacles in the transmission mechanisms of monetary policy and to the overall functioning of the financial sector. In the case of a typical developing economy – where external debts are denominated in foreign currency and domestic firms rely heavily on receipts in national currency – these difficulties are magnified. Financial dollarization in developing economies potentially leads to higher vulnerability of the domestic banking sector because of currency mismatch issues and large fluctuations in exchange rates, prompting the need for inflation-targeting monetary policy. This chapter investigates features of a high level of financial dollarization and the challenges it presents to inflation-targeting monetary policy in the Eurasian Economic Union. Based on a regression analysis, the chapter finds evidence that that the high level of financial dollarization in these countries tends to increase upward inflationary pressures at least in the short run, change the composition of total savings away from domestic currencies toward foreign ones, which potentially increases financial fragility in the banking sector. Thus, persistent high levels of financial dollarization imply that monetary policy is significantly limited through a greater exposure of banking sector to currency mismatches issues, which further increases demand for foreign assets.
{"title":"Monetary Policy Under Financial Dollarization: The Case of Eurasian Economic Union","authors":"Z. Ybrayev","doi":"10.2139/ssrn.2993374","DOIUrl":"https://doi.org/10.2139/ssrn.2993374","url":null,"abstract":"Despite the general improvement in controlling price levels over the last two decades, a substantial number of the population in emerging market economies still save and borrow in foreign-denominated currencies. There are reasons to believe, however, that a high degree of financial dollarization presents obstacles in the transmission mechanisms of monetary policy and to the overall functioning of the financial sector. In the case of a typical developing economy – where external debts are denominated in foreign currency and domestic firms rely heavily on receipts in national currency – these difficulties are magnified. Financial dollarization in developing economies potentially leads to higher vulnerability of the domestic banking sector because of currency mismatch issues and large fluctuations in exchange rates, prompting the need for inflation-targeting monetary policy. This chapter investigates features of a high level of financial dollarization and the challenges it presents to inflation-targeting monetary policy in the Eurasian Economic Union. Based on a regression analysis, the chapter finds evidence that that the high level of financial dollarization in these countries tends to increase upward inflationary pressures at least in the short run, change the composition of total savings away from domestic currencies toward foreign ones, which potentially increases financial fragility in the banking sector. Thus, persistent high levels of financial dollarization imply that monetary policy is significantly limited through a greater exposure of banking sector to currency mismatches issues, which further increases demand for foreign assets.","PeriodicalId":269683,"journal":{"name":"PSN: Regional Monetary Union (Topic)","volume":"24 6 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2017-06-27","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"131864219","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 aim of the paper is to understand the causes of the growth differential created between the Mediterranean and the Nordic economies since the creation of Euro. The Minsky’s financial instability hypothesis and the Kalecki’s five determinants of profits are used in the paper as interpretative tool in order to disentangle the sources of this growth divergence. In light of this analysis, the economic crisis in the Eurozone endogenously spreads in the economic system, and it is not, as many believe, the consequence of an exogenous shock. The two regions represent two different growth models, and this, in turn, makes a symmetric fiscal policy unsuccessful. Trade imbalances and the subsequent flow of profits differential is what has triggered and later exacerbated this divergent path. This emphasizes the necessity of a mechanism able to automatically counterbalance the persistent flows of profits from South to North. To this respect, a mechanism similar to the Keynes’s Clearing Union is proposed to offset this source of instability, i.e., an institution able to prevent the creation of imbalances as well as to restore convergence between the two blocks.
{"title":"The Euro Trade Imbalances and Growth Differentials: A Minsky-Kaleckian Approach","authors":"Giovanni Covi","doi":"10.2139/ssrn.2670526","DOIUrl":"https://doi.org/10.2139/ssrn.2670526","url":null,"abstract":"The aim of the paper is to understand the causes of the growth differential created between the Mediterranean and the Nordic economies since the creation of Euro. The Minsky’s financial instability hypothesis and the Kalecki’s five determinants of profits are used in the paper as interpretative tool in order to disentangle the sources of this growth divergence. In light of this analysis, the economic crisis in the Eurozone endogenously spreads in the economic system, and it is not, as many believe, the consequence of an exogenous shock. The two regions represent two different growth models, and this, in turn, makes a symmetric fiscal policy unsuccessful. Trade imbalances and the subsequent flow of profits differential is what has triggered and later exacerbated this divergent path. This emphasizes the necessity of a mechanism able to automatically counterbalance the persistent flows of profits from South to North. To this respect, a mechanism similar to the Keynes’s Clearing Union is proposed to offset this source of instability, i.e., an institution able to prevent the creation of imbalances as well as to restore convergence between the two blocks.","PeriodicalId":269683,"journal":{"name":"PSN: Regional Monetary Union (Topic)","volume":"2014 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2015-10-18","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"127457998","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}
EU-level fiscal rules have not been able to prevent the large-scale accumulation of government debt in many eurozone countries. One explanation was major flaws in the rules. Some of these flaws have now been corrected. But the failure of the rules depended also on fundamental problems of time inconsistency. The same time-inconsistency problems that the rules were designed to address also apply to the rules themselves. Fiscal councils may be subject to less of such problems than rules. Still it is unlikely that a monetary union where bail-outs of governments are part of the system is viable in the long run. The sustainability of the euro may require a restoration of the no-bail-out clause and a strengthening of the banking union in ways that would allow it to cope with the financial repercussions that could arise from allowing government bankruptcies
{"title":"The Roles of Fiscal Rules, Fiscal Councils and Fiscal Union in EU Integration","authors":"Lars Calmfors","doi":"10.2139/ssrn.2642723","DOIUrl":"https://doi.org/10.2139/ssrn.2642723","url":null,"abstract":"EU-level fiscal rules have not been able to prevent the large-scale accumulation of government debt in many eurozone countries. One explanation was major flaws in the rules. Some of these flaws have now been corrected. But the failure of the rules depended also on fundamental problems of time inconsistency. The same time-inconsistency problems that the rules were designed to address also apply to the rules themselves. Fiscal councils may be subject to less of such problems than rules. Still it is unlikely that a monetary union where bail-outs of governments are part of the system is viable in the long run. The sustainability of the euro may require a restoration of the no-bail-out clause and a strengthening of the banking union in ways that would allow it to cope with the financial repercussions that could arise from allowing government bankruptcies","PeriodicalId":269683,"journal":{"name":"PSN: Regional Monetary Union (Topic)","volume":"136 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2015-08-05","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"123586564","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}
There are many studies aiming at estimation of aggregate trade effects of the euro adoption by the old EU countries, which are based on the gravity model. In contrast to the existing literature we investigate whether the adoption of the common currency increases the export activity of individual firms. In particular, we refer to the new strand in the trade theory, based on the Melitz (2003) model, in which propensity to export depends on productivity and costs of exporting. There are many empirical studies, based on firm level data, showing the relevance of the Melitz (2003) model. Most of those studies demonstrate that export performance positively depends on firms’ characteristics, but they do not take into account the impact of the common currency on the cost of exporting. There are only few studies analyzing implications of euro adoption for firms’ exports of “old EU” members. In our empirical paper we use the firm level data basis set up by the EBRD and the World Bank. Using the probit model we analyze whether the accession of Slovenia and Slovakia to the Eurozone did increase the firms’ propensity to export in those countries.
{"title":"The Propensity to Exports and the Membership in the Economic and Monetary Union of Central and Eastern European Countries: The Micro-Econometric Firm Level Analysis","authors":"A. Cieślik, J. Michałek","doi":"10.2139/ssrn.2408445","DOIUrl":"https://doi.org/10.2139/ssrn.2408445","url":null,"abstract":"There are many studies aiming at estimation of aggregate trade effects of the euro adoption by the old EU countries, which are based on the gravity model. In contrast to the existing literature we investigate whether the adoption of the common currency increases the export activity of individual firms. In particular, we refer to the new strand in the trade theory, based on the Melitz (2003) model, in which propensity to export depends on productivity and costs of exporting. There are many empirical studies, based on firm level data, showing the relevance of the Melitz (2003) model. Most of those studies demonstrate that export performance positively depends on firms’ characteristics, but they do not take into account the impact of the common currency on the cost of exporting. There are only few studies analyzing implications of euro adoption for firms’ exports of “old EU” members. In our empirical paper we use the firm level data basis set up by the EBRD and the World Bank. Using the probit model we analyze whether the accession of Slovenia and Slovakia to the Eurozone did increase the firms’ propensity to export in those countries.","PeriodicalId":269683,"journal":{"name":"PSN: Regional Monetary Union (Topic)","volume":"94 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2014-03-03","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"133097376","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}
Before the ECB takes over responsibility for overseeing Europe’s largest banks, as foreseen in the establishment of a eurozone banking union, it plans to conduct an Asset Quality Review (AQR) throughout the coming year, which will identify the capital shortfalls of these banks. This study finds that a comprehensive and decisive AQR will most likely reveal a substantial lack of capital in many peripheral and core European banks. The authors provide estimates of the capital shortfalls of banks that will be stress-tested under the AQR using publicly available data and a series of shortfall measures. Their analysis identifies which banks will most likely need capital, where a public back stop is likely to be needed and, since many countries are already highly leveraged, where an EU-wide backstop might be necessary.
{"title":"Falling Short of Expectations? Stress-Testing the European Banking System","authors":"V. Acharya, Sascha Steffen","doi":"10.2139/ssrn.2370484","DOIUrl":"https://doi.org/10.2139/ssrn.2370484","url":null,"abstract":"Before the ECB takes over responsibility for overseeing Europe’s largest banks, as foreseen in the establishment of a eurozone banking union, it plans to conduct an Asset Quality Review (AQR) throughout the coming year, which will identify the capital shortfalls of these banks. This study finds that a comprehensive and decisive AQR will most likely reveal a substantial lack of capital in many peripheral and core European banks. The authors provide estimates of the capital shortfalls of banks that will be stress-tested under the AQR using publicly available data and a series of shortfall measures. Their analysis identifies which banks will most likely need capital, where a public back stop is likely to be needed and, since many countries are already highly leveraged, where an EU-wide backstop might be necessary.","PeriodicalId":269683,"journal":{"name":"PSN: Regional Monetary Union (Topic)","volume":"28 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2013-12-20","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"121940474","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}
We show that welfare can be lower under complete financial markets than under autarky in a monetary union with home bias, sticky prices and asymmetric shocks. Such a monetary union is a second-best environment in which the structure of financial markets affects risk-sharing but also shapes the dynamics of inflation rates and the welfare costs from nominal rigidities. Welfare reversals arise for a variety of empirically plausible degrees of price stickiness when the Marshall-Lerner condition is met. These results carry over a model with active fiscal policies, and hold within a medium-scale model, although to a weaker extent.
{"title":"Welfare Reversals in a Monetary Union","authors":"S. Auray, A. Eyquem","doi":"10.2139/ssrn.2376158","DOIUrl":"https://doi.org/10.2139/ssrn.2376158","url":null,"abstract":"We show that welfare can be lower under complete financial markets than under autarky in a monetary union with home bias, sticky prices and asymmetric shocks. Such a monetary union is a second-best environment in which the structure of financial markets affects risk-sharing but also shapes the dynamics of inflation rates and the welfare costs from nominal rigidities. Welfare reversals arise for a variety of empirically plausible degrees of price stickiness when the Marshall-Lerner condition is met. These results carry over a model with active fiscal policies, and hold within a medium-scale model, although to a weaker extent.","PeriodicalId":269683,"journal":{"name":"PSN: Regional Monetary Union (Topic)","volume":"120 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2013-11-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"123212417","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}
This paper compares different nominal anchors to promote internal and external competitiveness in the case of a fixed exchange rate regime for the future single regional currency of the Economic Community of the West African States (ECOWAS). We use counterfactual analyses and estimate a model of dependent economy for small commodity exporting countries. We consider four foreign anchor currencies: the US dollar, the euro, the yen and the yuan. Our simulations show little support for a dominant peg in the ECOWAS area if they pursue several goals: maximizing the export revenues, minimizing their variability, stabilizing them and minimizing the real exchange rate misalignments from the fundamental value.
{"title":"West African Single Currency and Competitiveness","authors":"G. Dufrénot, Kimiko Sugimoto","doi":"10.1111/rode.12064","DOIUrl":"https://doi.org/10.1111/rode.12064","url":null,"abstract":"This paper compares different nominal anchors to promote internal and external competitiveness in the case of a fixed exchange rate regime for the future single regional currency of the Economic Community of the West African States (ECOWAS). We use counterfactual analyses and estimate a model of dependent economy for small commodity exporting countries. We consider four foreign anchor currencies: the US dollar, the euro, the yen and the yuan. Our simulations show little support for a dominant peg in the ECOWAS area if they pursue several goals: maximizing the export revenues, minimizing their variability, stabilizing them and minimizing the real exchange rate misalignments from the fundamental value.","PeriodicalId":269683,"journal":{"name":"PSN: Regional Monetary Union (Topic)","volume":"59 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2013-11-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"116590116","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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