Some Keynesian Analysis - 3. FIGURE 1: The Keynesian View - Some Basic Relationships
|
|
- Nathan Ellis
- 5 years ago
- Views:
Transcription
1 Some Keynesian Analysis - 3 FIGURE 1: The Keynesian View - Some Basic Relationships
2 Floating Exchange Rates and the United States In 1981, the U.S. faced unemployment and excess capacity. The resulting Reagan-led "supply-side" policy led to a massive fiscal expansion. This expansion came about predominantly from increased defense spending and decreased taxes. The expansion was accomplished with a policy of relatively tight money. The presence of excess capacity allowed this growth without inflation, as money growth was relatively low and stable. From 1981 to 1983, the following transmission of effects seems to have occurred. There was a massive increase in government spending, g. This increase led through the multiplier to an increase in income, an increase in imports, and a fall in the dollar (all else equal.) This chain of events is shown as row (1) in the diagram below. However, the increase in government spending led to massive government borrowing, and a rise in real U.S. interest rates as depicted in (2), below. Though this effect tended to decrease investment and then income, excess capacity existed at the time so that "crowding out" of private investment funds by government borrowing was not as severe as it might otherwise have been. The linkages discussed above and below are the following: g (1) gni (ex - im) = current account S (2) r i multiplier feedback (3) i f X M/P sterilization (4) S... (current account more) U.S. income began to grow strongly. However, the increase in real U.S. interest rates led to a huge net foreign investment inflow to the U.S., (3). Furthermore, the impact of this capital inflow on money supply was largely sterilized. Real money supply remained relatively constant, inflation slowed, and the capital inflow did not lower real rates. With sterilization, the large net foreign investment flows led to Some Keynesian Analysis - 7
3 Based on these links and an assumption of relatively elastic capital flows for the United States, we have the following suggested linkages between policy initiatives and foreign currency value changes relative to the dollar: Tight M/P gni r elastic capital flows S dominate income effect Loose g r gni Loose M/P gni r raise income, while the S interest effect is mixed Loose g r gni Loose M/P gni r mixed income effect interest S rate effect will dominate Tight g r gni Tight M/P gni r mixed interest rate effect S dominant income effect Tight g r gni From 1981 to 1985, with the exception of January 1983, tight money growth and loose government spending led to high real interest rates and a high dollar value. With more money growth and large federal deficits (i.e. g, the dollar fell through In 1989, the dollar rose again. Certainly during this period of exchange rate changes, resources were reallocated between the traded and nontraded sectors. To the extent that these shifts were costly, the U.S. may have lost out from policies that didn't consider and incorporate exchange rate changs. Unless world income growth and interest rate growth differentials come more into line, real exchange rates will continue to change, and a series of resource shifts are likely to continue. Fixed Exchange Rates and France Our consideration of fixed exchange rates will center on an historical relationship between the French franc and the Deutschemark. The value of the franc was pegged to the Belgian/Luxembourg franc, Danish krone, Deutschemark, Dutch Some Keynesian Analysis - 10
4 guilder, Italian lira, Irish pound, Portuguese escudo and the Spanish peseta. This system of pegged exchange rates is known as the Exchange Rate Mechanism (ERM) of the European Monetary System (EMS). ERM currency values were first fixed in 1979, and the parities were reset from time to time. The longest period of stability ran from This fixing of exchange rates necessitated coordination of monetary, fiscal, investment and trade policies among the countries with currencies in the ERM. Changes in the parities indicated that this coordination was not being achieved. A major revaluation occurred in 1987, and the lire was devalued in January During the period, the French franc remained fixed in value relative to the Deutschemark. This situation was caused by some basic changes in the economic policy of the Socialist government. To see what necessitated this policy, we will use the Keynesian view to depict the economic policy alternatives and their effects. The ERM was also known as "the snake", as the exchange rates between the currencies had to remain within agreed upon bounds around their assigned parities (or the inside of the snake). Importantly, the values of these currencies floated as a basket together against the dollar, and most other currencies. The ERM rates and the ranges around these rates (divergence limits) in which the currencies had to trade relative to each other were reported regularly. In 1992, the current rates and divergence limits were the following: Some Keynesian Analysis - 11
5 Currency Parities in the EMS Exchange Rate Mechanism (Financial Times, 7/31/92) One EMS Divergence unit costs Limit (±) One DM costs Belgian/Luxembourg franc % British pound sterling % Danish krone % Deutschemark % ( EMS unit = 1 DM) French franc % Dutch guilder % Irish punt % Italian lira % Portuguese Escudo % Spanish Pesata % Historically, the ERM French franc value was devalued relative to the Deutschemark. In 1982, the French government was pursuing expansionary monetary and fiscal policies, while other ERM countries were not. Furthermore, the French also restricted foreign capital flows. Symbolically, we can analyze this scenario as follows: g (1) gni im current account pressure S (relative to $) (reserve outflow in ERM) (2) r X i f tendency for S but capital flow restricted and M (3) r X if S (capital flow restricted, but some left, relative to $) (reserve outflow in ERM) (4) P current account S tendency from PPP We find that the income and price effects led to pressure on the franc to devalue, and France had to run down its reserves unless capital in-flows compensated. Instead, net capital outflows fluctuated wildly. S/T capital inflows decreased. Foreign direct and other L/T investment were negative balances, while portfolio investment was positive. The net effect was that the expansion failed to bring in foreign investment at levels sufficient to sustain the huge income- (and price-) driven current account deficits. Some Keynesian Analysis - 12
6 Due to the reality of exchange restrictions, less net foreign investment occurred. Without this effect, link (2) above, this potential franc demand failed to buoy the currency s value. The fact that exchange restrictions limited the foreign net investment response to real interest rate changes is indicated by the X breaking the link. Net capital inflows did not occur, and the franc was overvalued. As a result, the Central Banks of the other countries in the ERM were required to buy French francs. When these reserve flows grew too large, the ERM revalued the DM and Dutch guilder and devalued the other currencies. (Revaluation is increasing a fixed currency s relative value, the opposite of devalue.) Under fixed exchange rates, foreign exchange reserves are a measure of the likelihood of devaluations. Furthermore, when exchange rate changes do come between two "fixed" or pegged currencies, a jump in the relative values of the currencies occurs. With the rundown in French reserves and run up in German and Dutch reserves, the franc was devalued in March Over the 1990s, the need for such adjustments diminished, and 11 European Union countries decided to adopt a common currency on January 1, The adopting countries and associated valuations are listed in bold in Table 1 below: Some Keynesian Analysis - 13
7 Table 1 Countries Adopting the Euro Currency Exchange Currency Date of Rate Rate Currency Name Abbreviation Country Establishment 1 EUR = Austrian schilling ATS Austria 31 December Belgian franc BEF Belgium 31 December Danish krone 3 DKK Denmark 31 December Deutsche mark DEM Germany 31 December Finnish mark FIM Finland 31 December French franc FRF France 31 December 1998 Monégasque franc MCF Monaco Irish pound IEP Ireland 31 December Italian lira ITL Italy 31 December 1998 Sammarinese lira SML San Marino Vatican lira VAL Vatican City Luxembourg franc LUF Luxembourg 31 December Dutch guilder NLG Netherlands 31 December Portuguese escudo PTE Portugal 31 December Spanish peseta ESP Spain 31 December Greek drachma GRD Greece 19 June Estonian kroon 3 EEK Estonia 27 June Lithuanian lita 3 LTL Lithuania 27 June Slovenian tolar SIT Slovenia 27 June Cypriot pound CYP Cyprus 29 April Latvian lat 3 LVL Latvia 29 April Maltese lira MTL Malta 29 April Slovak koruna SKK Slovakia 25 November 2005 Countries in bold are the original 11 members on January 1, Subsequently, Greece (2001), Slovenia (2007), Cyprus (2008), Malta (2008), Slovakia (2009), Estonia (2011), Latvia (2014) adopted the Euro, and Lithuania is scheduled for adoption in Denmark and the U.K. are exempted from adopting the Euro under the Maastricht Treaty of 1992, though Denmark still maintains its ERM parity. All other countries must meet the ERM parity conditions for twoyears prior to adopting the Euro. 1. Before 17 March 2007, the exchange rate was 1 EUR = SKK. 2. Before 8 July 2008, the exchange rate was 1 EUR = SKK. 3. Euro adoption has not yet taken place for Denmark, Estonia, Latvia and Lithuania. The experience of the countries using the Euro as their currency has been mixed. Trade, labor mobility, and cross-country investment and wealth have flourished. However, production has tended to center in areas that were most productive prior to the common currency. Furthermore, a well-worn path of adjustment for poorer nations has been precluded. Some Keynesian Analysis - 14
8 Nations using the Euro can no longer allow their home currency to depreciate to improve the competitiveness of their local production for export. At the same time, this depreciation makes imports more expensive. Both of these changes improve the trade balance, and return domestic production competitiveness, albeit at a lower profit level. The massive credit default of the PIGS (Portugal, Italy, Greece, Spain) might not have occurred or at least have been less violent if the floating exchange rate buffer had remained. The 50% write down of Greek debt was a defacto devaluation of the Euro for the purpose of repaying Greek debt. Of course, the heavy-handed debt renegoation wasn t called a selective Euro devaluation. Despite the difficulties of some countries that have adopted the Euro, more countries seek to adopt the currency. The J-Curve Pattern of Current Account Exchange Rate Adjustment By assuming that a depreciating domestic currency value corrects a balance of payments deficit (and appreciation corrects surplus), we have assumed that immediate substitutes are available for traded goods and services. Lower export prices may not lead to significant export growth or import reduction. A measure of this trade characteristic is known as the Marshall-Lerner condition (which is named after its developers). This condition is based on the sensitivity of export and import demands to exchange rate changes. These sensitivities are measured as the export and import elasticities with respect to exchange rate changes. When the absolute value of the sum of the export and import exchange rate demand elasticities of a country is less than one, then a domestic currency depreciation will worsen, not improve, the trade balance. When this absolute value is greater than one, then a depreciation should improve the trade balance. The condition, in which elastic demand responses to a depreciation improve the trade Some Keynesian Analysis - 15
9 balance, is known as the Marshall-Lerner Condition. It is stated algebraically as d x + d m > 1 and s x = s m = and d x elasticity of demand for domestic country s exports d m elasticity of demand for imports by domestic country s x elasticity of supply of domestic country s exports s m elasticity of supply of foreign country producing imports infinity If d x + d m > 1, then the depreciation of a country's currency relative to its trading partners improves the country's balance of payments. Since elasticities of demands are determined by the availability of substitutes, (the more substitutes, the more elastic is demand), the Marshall-Lerner condition is likely to hold across countries with substitutes for their import needs. 2 In the short-run, is it reasonable to assume such a relatively high price sensitivity for trade flows? Probably not. Instead, we should recognize that import substitution takes some time. Many purchases cannot be adjusted immediately following a price change. Therefore, a price increase leads, first, to an increase in seller's revenue. Overtime, substitution occurs, sales fall, and revenue falls. For countries, price may be viewed as the exchange rate deviation from purchasing power parity value, and net international revenue is the current account surplus or deficit. Analogously, limited trade substitution should imply that domestic currency appreciation is followed immediately by current account improvement. In the medium- to long-run, the current account should worsen. For domestic currency depreciations, a pattern of a rapidly falling current account, and then a significant rebound and rising current account should result. This phenomenon has been called the J-Curve. 2 Developing countries may have inelastic demands for the very commodities needed for their development (no substitutes). Therefore, a devaluation may well worsen these countries trade deficits. In these cases, managed exchange rates are all but necessary. Some Keynesian Analysis - 16
10 Specifically, the J-Curve is an empirical phenomenon, which documents how the trade balance responds to a devaluation under fixed exchange rates or a significant depreciation under flexible exchange rates. The response is hypothesized to resemble a "J" over a period of 6 months to 2 years. After a devaluation or depreciation, the trade balance worsens before finally improving. In the short run, it is harder to change buying practices than in the long run. (This is especially true internationally since order delivery and payment lags can run to a year or more.) As a result of this difficulty, substitution is much harder in the short run than in the long run. Therefore, short-run import demand elasticities are lower than long-run elasticities. Short-run demand elasticities, as reflected in the ability to substitute, are not likely to satisfy the Marshall-Lerner condition. Initially following a devaluation, the trade balance worsens until substitution can occur readily. After a period of six months to two years, the trade balance deficit will finally improve (if the longer-run import demand elasticities are great enough in absolute value to satisfy the Marshall-Lerner condition). The J-curve phenomenon is important, because it implies that a country that is devaluing its currency must have reserves available to support the resulting short-run worsening of the current account balance. Otherwise, a series of devaluations or other measures may have to be used to correct a balance of payments deficit problem. The J-curve also has implications for floating rate currencies. When a currency depreciates, increasing export demand and decreasing import demand are two things that will cushion its descent. However, the J-curve phenomenon suggests that when a currency depreciates, an increase in exports or decrease in imports will take a while to materialize. As a result, a currency is likely to overshoot its longer-run equilibrium level. Some Keynesian Analysis - 17
11 Production efficiencies, resource availability, tastes and money growth largely determine the long-run exchange rate. Overshooting the long-run exchange rate means that transitory factors have led to current account or basic balance account imbalances, which actually feed on themselves to drive the current exchange rate away from its long-run value. In a completely free market, an alternative to J-Curve-linked overshooting is an officially managed currency depreciation. Of course, this policy requires that the policy makers in the associated country's central bank have a pretty good idea about the size of the import demand and export supply elasticities and the longer-run equilibrium exchange rate. They must also be willing to subsidize speculators, who will trade against them. Needless to say, the existence of this knowledge and resources may not be the case. Incorrect intervention may only postpone a further and more dramatic currency value change with tremendous overshooting and adjustment costs. Central Bank Intervention The Keynesian view highlights a trade-off between short-run exchange rate changes and central bank intervention. If the short-run costs of flexible exchange rate-induced resource reallocation is high, then central bank intervention, which maintains the exchange rate at or near its long-run equilibrium level, can be justified. For example, net foreign investment inflows can lead to a higher domestic currency value and a current account deficit. In response to the short-run investment demand shift, the central bank of the country facing the domestic currency appreciation is likely sell the domestic currency to keeps its value near the long-run current account-determined equilibrium. The central bank will sell its currency to offset the increased investment demand. Such intervention against current market direction is known as "leaning against the wind." However, if the central bank is not right Some Keynesian Analysis - 18
M/P (1) r i gni ( im with multiplier feedback effects) (2) i f. S dependent on capital flow elasticity
When real money supply is increased, more money is available for transactions than is needed. Individuals use some of this money to buy financial assets, and nominal interest rates fall. With no inflation,
More information4. SOME KEYNESIAN ANALYSIS
4. SOME KEYNESIAN ANALYSIS Fiscal and Monetary Policy... 2 Some Basic Relationships... 2 Floating Exchange Rates and the United States... 7 Fixed Exchange Rates and France... 11 The J-Curve Pattern of
More information4. SOME KEYNESIAN ANALYSIS
4. SOME KEYNESIAN ANALYSIS Fiscal and Monetary Policy... 2 Some Basic Relationships... 2 Floating Exchange Rates and the United States... 7 Fixed Exchange Rates and France... 11 The J-Curve Pattern of
More information4. SOME KEYNESIAN ANALYSIS
4. SOME KEYNESIAN ANALYSIS Fiscal and Monetary Policy... 2 Some Basic Relationships... 2 Floating Exchange Rates and the United States... 7 Fixed Exchange Rates and France... 11 The J-Curve Pattern of
More informationNCU SUPPLEMENT to the 2000 ISDA Definitions ISDA INTERNATIONAL SWAPS AND DERIVATIVES ASSOCIATION, INC.
NCU SUPPLEMENT to the 2000 ISDA Definitions ISDA INTERNATIONAL SWAPS AND DERIVATIVES ASSOCIATION, INC. Copyright 2000 by INTERNATIONAL SWAPS AND DERIVATIVES ASSOCIATION, INC. 600 Fifth Avenue, 27th Floor
More informationExchange rate statistics. Statistical Supplement to the Monthly Report 5 JULY 2010 SEPTEMBER OCTOBER NOVEMBER AUGUST
Exchange rate statistics JULY 2010 AUGUST SEPTEMBER OCTOBER NOVEMBER Statistical Supplement to the Monthly Report 5 EUROSYSTEM Deutsche Bundesbank Wilhelm-Epstein-Straße 14 60431 Frankfurt am Main Germany
More informationBriefing 26 Second revision
Task Force on Economic and Monetary Union Briefing 26 Second revision Briefing prepared by the Directorate-General for Research Economic Affairs Division The opinions expressed are those of the author
More informationUse of survey data Inflation perceptions: a cross country analysis
European Commission Directorate General for Economic and Financial Affairs Use of survey data Inflation perceptions: a cross country analysis Roberta Friz EU Workshop on Recent Developments in Business
More informationTax Refund Policies of Different Countries
Remark: The following information is for reference only. Information is updated as of 16 May 2016 and provided by Transforex Currency Exchange Co., Ltd. ( TransForex ). Since the tax refund policy of different
More informationDEVELOPMENTS IN THE COST COMPETITIVENESS OF THE EUROPEAN UNION, THE UNITED STATES AND JAPAN MAIN FEATURES
DEVELOPMENTS IN THE COST COMPETITIVENESS OF THE EUROPEAN UNION, THE UNITED STATES AND JAPAN MAIN FEATURES The euro against major international currencies: During the second quarter of 2000, the US dollar,
More informationSTAT/07/55 23 April 2007
STAT/07/55 23 April 2007 Provision of deficit and debt data for 2006 Euro area and EU27 government deficit at 1.6% and 1.7% of GDP respectively Government debt at 69.0% and 61.7% In 2006, the government
More information139/ October 2006
139/2006-23 October 2006 Provision of deficit and debt data for 2005 Euro area and EU25 government deficit at 2.4% and 2.3% of GDP respectively Government debt at 70.8% and 63.2% In 2005 the government
More informationPRICE AND COST COMPETITIVENESS
PRICE AND COST COMPETITIVENESS EUROPEAN COMMISSION DIRECTORATE-GENERAL FOR ECONOMIC AND FINANCIAL AFFAIRS *** * *** * The quarterly reports on "Price and Cost Competitiveness" provide a periodic assessment
More informationThe Euro & UK Business
T H E E U R O & U K B U S I N E S S I N 2 0 0 2 The Euro & UK Business -an explanatory booklet for UK Businesses trading with the Euro-zone BU SIN ESS APPLIC ATIO N SO FTW AR E D EVELO PER S ASSO C IATIO
More informationLecture 6: Intermediate macroeconomics, autumn Lars Calmfors
Lecture 6: Intermediate macroeconomics, autumn 2009 Lars Calmfors 1 Topics Systems of fixed exchange rates Interest rate parity under a fixed exchange rate Stabilisation policy under a fixed exchange rate
More informationMonetary Integration
Monetary Integration By Michael Möhnle Table of Contents 1. 6-Stages of Economic Integration 2. International Monetary Integration - Bretton Woods 3. European Monetary Integration 4. European (Economic
More informationWelcome to: International Finance
Welcome to: International Finance Introduction & International Monetary System Reading: Chapter 1 (p1-3) & Chapter 2 Why is International Finance Important? ٣ Why is International Finance Important? In
More informationStudy Questions (with Answers) Lecture 17 European Monetary Unification and the Euro
Study Questions (with Answers) Page 1 of 4(5) Study Questions (with Answers) Lecture 17 pean Monetary Unification and the Part 1: Multiple Choice Select the best answer of those given. 1. The is a. The
More informationRevision of the Weights for Calculation of Danmarks Nationalbank s Effective Krone- Rate Index
77 Revision of the Weights for Calculation of Danmarks Nationalbank s Effective Krone- Rate Index Erik Haller Pedersen, Economics Introduction Danmarks Nationalbank publishes the effective krone-rate index
More informationFlash Eurobarometer N o 189a EU communication and the citizens. Analytical Report. Fieldwork: April 2008 Report: May 2008
Gallup Flash Eurobarometer N o 189a EU communication and the citizens Flash Eurobarometer European Commission Expectations of European citizens regarding the social reality in 20 years time Analytical
More informationInternational Environment Economics for Business (IEEB)
International Environment Economics for Business (IEEB) Sergio Vergalli sergio.vergalli@unibs.it Vergalli - Lezione 1 The European Currency Crisis (1992-1993) Presented By: Garvey Ngo Nancy Ramirez Background
More informationInternationalEconomicTrends
InternationalEconomicTrends May 999 The Euro: New Currency and New Data The third stage of the European Economic and Monetary Union (EMU) began on January, 999. At that time the currencies of the eleven
More informationQUARTERLY REPORT FOURTH QUARTER 1998
MAIN FEATURES The EU currencies appreciated by 5% against the US dollar but fell by 10.5% against the Japanese yen. These currency movements contributed to a small gain (about 1%) in the Union s average
More informationThe Transition to a Monetary Union
The Transition to a Monetary Union The Maastricht Treaty The Maastricht Treaty was signed in 1991 It is the blueprint for progress towards monetary unification in Europe It is based on two principles:
More informationThe International Monetary System
INTERNATIONAL FINANCIAL MANAGEMENT Fourth Edition EUN / RESNICK The International Monetary System 2 Chapter Two INTERNATIONAL Chapter Objective: FINANCIAL MANAGEMENT This chapter serves to introduce the
More informationEXPATRIATE TAX GUIDE. Taxation of income from employment in the EU & EEA
EXPATRIATE TAX GUIDE Taxation of income from employment in the EU & EEA Poland 2016 CONTENTS* 2 Austria 4 Belgium 6 Bulgaria 8 Croatia 10 Cyprus 12 Czech Republic 14 Denmark 16 Estonia 18 Finland 20 France
More information: Monetary Economics and the European Union. Lecture 8. Instructor: Prof Robert Hill. The Costs and Benefits of Monetary Union II
320.326: Monetary Economics and the European Union Lecture 8 Instructor: Prof Robert Hill The Costs and Benefits of Monetary Union II De Grauwe Chapters 3, 4, 5 1 1. Countries in Trouble in the Eurozone
More informationThe Brussels Economic Forum
The Brussels Economic Forum What kind of policies should the new Member States apply to optimise their speed of convergence? Banco de Portugal VÍTOR CONSTÂNCIO Brussels, 23d of April 24 I. INTRODUCTION
More informationEconomics of Money, Banking, and Fin. Markets, 10e (Mishkin) Chapter 18 The International Financial System
Economics of Money, Banking, and Fin. Markets, 10e (Mishkin) Chapter 18 The International Financial System 18.1 Intervention in the Foreign Exchange Market 1) A central bank of domestic currency and corresponding
More informationChapter 13 Exchange Rates, Business Cycles, and Macroeconomic Policy in the Open Economy
Chapter 13 Exchange Rates, Business Cycles, and Macroeconomic Policy in the Open Economy 1 Goals of Chapter 13 Two primary aspects of interdependence between economies of different nations International
More informationBalance of Payments Analysis (BOP)
Topic2 Balance of Payments Analysis (BOP) 1 BOP Statement A statistic measurement of all transactions between domestic and foreign residents over a specified period of time. 2 Business Transactions which
More informationSTAT/09/56 22 April 2009
STAT/09/56 22 April 2009 Provision of deficit and debt data for 2008 - first notification Euro area and EU27 government deficit at 1.9% and 2.3% of GDP respectively Government debt at 69.3% and 61.5% In
More informationI. Identifying information. Contribution ID: 061f8185-8f02-4c02-b a7d06d30f Date: 15/01/ :05:48. * Name:
Contribution ID: 061f8185-8f02-4c02-b530-284a7d06d30f Date: 15/01/2018 16:05:48 Public consultation on a possible EU action addressing the challenges of access to social protection for people in all forms
More informationECFIN/C-1 Fourth quarter 2000
ECFIN/C-1 Fourth quarter 2000 ECFIN/44/4/00-EN This document exists in English only. European Communities, 2001. MAIN FEATURES During the fourth quarter of 2000, the euro appreciated against the US dollar,
More informationAuditor s involvement in the contributions to the Single Resolution Fund. Providing assurance for 2014 and 2015 SURVEY
Auditor s involvement in the contributions to the Single Resolution Fund Providing assurance for 2014 and 2015 SURVEY AUDIT & ASSURANCE SEPTEMBER 2016 HIGHLIGHTS This survey demonstrates divergence across
More informationECC-Net: Travel App. A new mobile application for European consumers when travelling abroad
1 ECC-Net: Travel App A new mobile application for European consumers when travelling abroad A joint project of the European Consumer Centres Network ------------------------------------------------------
More informationCHAPTER 2. EXCHANGE RATE DETERMINATION: Exchange Rate Quotations, Balance of Payments, Prices, Parities and Interest Rates
CHAPTER 2. EXCHANGE RATE DETERMINATION: Exchange Rate Quotations, Balance of Payments, Prices, Parities and Interest Rates 1. Foreign Exchange Rates and Quotations A foreign exchange rate is the price
More informationDEVELOPMENTS IN THE COST COMPETITIVENESS OF THE EUROPEAN UNION, THE UNITED STATES AND JAPAN MAIN FEATURES
DEVELOPMENTS IN THE COST COMPETITIVENESS OF THE EUROPEAN UNION, THE UNITED STATES AND JAPAN MAIN FEATURES The euro against major international currencies: During the first quarter of 2001, the euro appreciated
More informationEconomic and Monetary Union in Europe
16 Economic and Monetary Union in Europe CHAPTER OUTLINE 16.1 Introduction 16.2 The Snake in the Tunnel 16.3 The background to the European Monetary System 16.4 The Exchange Rate Mechanism 16.5 The European
More informationCommission recommends 11 Member States for EMU
IP/98/273 Brussels, 25 March 1998 Commission recommends 11 Member States for EMU The European Commission has today recommended that the following eleven countries meet the necessary conditions to adopt
More informationPreliminary results of International Trade in 2014: in nominal terms exports increased by 1.8% and imports increased by 3.
International Trade Statistics 7 July, 215 Preliminary results of International Trade in : in nominal terms exports increased by 1.8% and imports increased by 3.2% vis-à-vis 213 In, exports of goods increased
More informationEU BUDGET AND NATIONAL BUDGETS
DIRECTORATE GENERAL FOR INTERNAL POLICIES POLICY DEPARTMENT ON BUDGETARY AFFAIRS EU BUDGET AND NATIONAL BUDGETS 1999-2009 October 2010 INDEX Foreward 3 Table 1. EU and National budgets 1999-2009; EU-27
More informationMay 2012 Euro area international trade in goods surplus of 6.9 bn euro 3.8 bn euro deficit for EU27
108/2012-16 July 2012 May 2012 Euro area international trade in goods surplus of 6.9 3.8 deficit for EU27 The first estimate for the euro area 1 (EA17) trade in goods balance with the rest of the world
More informationEligibility? Activities covered? Clients covered? Application or notification required? N/A N/A N/A N/A N/A N/A N/A
NO DEAL BREXIT TRACKER Governments in European Economic Area (EEA) member states are announcing domestic measures in order to prepare for the UK's withdrawal from the EEA. The table below monitors these
More informationISSN X EUROPEAN ECONOMY. Special Report No 2 / 2004 EUROPEAN COMMISSION DIRECTORATE-GENERAL FOR ECONOMIC AND FINANCIAL AFFAIRS
ISSN 168-33X Special Report No 2 / 2 EUROPEAN ECONOMY EUROPEAN COMMISSION DIRECTORATE-GENERAL FOR ECONOMIC AND FINANCIAL AFFAIRS Convergence report 2 European Economy appears six times a year. It contains
More informationI. Introduction. II. Exchange rates in European transition economies
EXCHANGE RATE VOLATILITY IN CENTRAL AND EASTERN EUROPE Horobet Alexandra Academy of Economic Studies Bucharest, Department of International Business and Economics, +40-21- 3191990, alexandra.horobet@rei.ase.ro
More information26/10/2016. The Euro. By 2016 there are 19 member countries and about 334 million people use the. Lithuania entered 1 January 2015
The Euro 1 The Economics of the Euro 2 The History and Politics of the Euro Prepared by: Fernando Quijano Dickinson State University 1of 88 In 1961 the economist Robert Mundell wrote a paper discussing
More informationJune 2012 Euro area international trade in goods surplus of 14.9 bn euro 0.4 bn euro surplus for EU27
121/2012-17 August 2012 June 2012 Euro area international trade in goods surplus of 14.9 0.4 surplus for EU27 The first estimate for the euro area 1 (EA17) trade in goods balance with the rest of the world
More informationAugust 2012 Euro area international trade in goods surplus of 6.6 bn euro 12.6 bn euro deficit for EU27
146/2012-16 October 2012 August 2012 Euro area international trade in goods surplus of 6.6 12.6 deficit for EU27 The first estimate for the euro area 1 (EA17) trade in goods balance with the rest of the
More informationConsumer credit market in Europe 2013 overview
Consumer credit market in Europe 2013 overview Crédit Agricole Consumer Finance published its annual survey of the consumer credit market in 28 European Union countries for seven years running. 9 July
More informationExchange Rates in the Long Run
Exchange Rates in the Long Run What determines exchange rates? Supply + Demand!» Flow models: Demand & supply of FX to purchase goods and services» Stock models, or asset models Demand & supply of available
More informationEU-28 RECOVERED PAPER STATISTICS. Mr. Giampiero MAGNAGHI On behalf of EuRIC
EU-28 RECOVERED PAPER STATISTICS Mr. Giampiero MAGNAGHI On behalf of EuRIC CONTENTS EU-28 Paper and Board: Consumption and Production EU-28 Recovered Paper: Effective Consumption and Collection EU-28 -
More informationFinal exam Non-detailed correction 3 hours. This are indicative directions on how structure the essay questions and what was expected.
International Finance Master PEI Fall 2011 Nicolas Coeurdacier Final exam Non-detailed correction 3 hours This are indicative directions on how structure the essay questions and what was expected. 1. Multiple
More informationThe Euro and the New Member States
The Euro and the New Member States Natalia Tamirisa International Monetary Fund Warsaw, October 29, 2007 Focus Macroeconomic challenges NMS face as they prepare to join EMU Policies that can help overcome
More informationAssignment 13 (Chapter 14)
Assignment 13 (Chapter 14) 1. According to the absorption approach, the economic circumstances that best warrant a currency devaluation is where the domestic economy faces: a) Unemployment coupled with
More informationGovernor of the Bank of Latvia
Lessons from Latvia s internal adjustment strategy Ilmārs Rimšēvičs Governor of the Bank of Latvia September 4, 2012 Presentation outline Overheating of Latvia s economy Expansionary consolidation Lessons
More informationChapter 18. The International Financial System Intervention in the Foreign Exchange Market
Chapter 18 The International Financial System 18.1 Intervention in the Foreign Exchange Market 1) A central bank of domestic currency and corresponding of foreign assets in the foreign exchange market
More informationFirst estimate for 2011 Euro area external trade deficit 7.7 bn euro bn euro deficit for EU27
27/2012-15 February 2012 First estimate for 2011 Euro area external trade deficit 7.7 152.8 deficit for EU27 The first estimate for the euro area 1 (EA17) trade in goods balance with the rest of the world
More information14349/16 MP/SC/mvk 1 DG D 2B
Council of the European Union Brussels, 15 November 2016 (OR. en) 14349/16 COPEN 336 EUROJUST 146 EJN 72 NOTE From: To: General Secretariat of the Council Delegations No. prev. doc.: 9638/15 Subject: Implementation
More informationFinal exam Non-detailed correction 3 hours
International Finance Master PEI Spring 2013 Nicolas Coeurdacier Final exam Non-detailed correction 3 hours Documents not allowed. Basic calculator allowed. For the Multiple Choice Questions, use the answer
More informationMarch 2005 Euro-zone external trade surplus 4.2 bn euro 6.5 bn euro deficit for EU25
STAT/05/67 24 May 2005 March 2005 Euro-zone external trade surplus 4.2 6.5 deficit for EU25 The first estimate for euro-zone 1 trade with the rest of the world in March 2005 was a 4.2 billion euro surplus,
More informationCross-border VAT refunds for EU businesses
Cross-border VAT refunds for EU businesses Contents 1. GENERAL INFORMATION... 2 1.1. Legislation changes and advantages of the new system... 2 1.2. Eligibility for a cross-border EU VAT refund... 2 1.3.
More informationSurvey on the access to finance of enterprises in the euro area. October 2014 to March 2015
Survey on the access to finance of enterprises in the euro area October 2014 to March 2015 June 2015 Contents 1 The financial situation of SMEs in the euro area 1 2 External sources of financing and needs
More informationAugust 2005 Euro-zone external trade deficit 2.6 bn euro 14.2 bn euro deficit for EU25
STAT/05/132 20 October 2005 August 2005 Euro-zone external trade deficit 2.6 14.2 deficit for EU25 The first estimate for euro-zone 1 trade with the rest of the world in August 2005 was a 2.6 billion euro
More informationEconomics. The Factors of Production. Factor Explanation Payment for its use. Economic Systems. Free Enterprise Centrally-planned Mixed Economy
Needs: Items that an individual needs to survive e.g. food, shelter, clothing. Wants: Items that an individual desires but does not necessarily need e.g. TV, big house. Economics: The study of how scarce
More informationSTAT/14/ October 2014
STAT/14/158-21 October 2014 Provision of deficit and debt data for 2013 - second notification Euro area and EU28 government deficit at 2.9% and 3.2% of GDP respectively Government debt at 90.9% and 85.4%
More informationEMPLOYMENT RATE IN EU-COUNTRIES 2000 Employed/Working age population (15-64 years)
EMPLOYMENT RATE IN EU-COUNTRIES 2 Employed/Working age population (15-64 years EU-15 Denmark Netherlands Great Britain Sweden Portugal Finland Austria Germany Ireland Luxembourg France Belgium Greece Spain
More informationState aid: Overview of national rescue measures and deposit guarantee schemes
MEMO/08/614 Brussels, 10 th October 2008 State aid: Overview of national rescue measures and deposit guarantee s (See table attached in annex) This information is compiled from a range of sources and is
More informationExchange-Rate and Interest-Rate Driven Competitive Advantages in the EMU
Exchange-Rate and Interest-Rate Driven Competitive Advantages in the EMU Niclas Andrén Department of Business Administration, Lund University PO Box 7080, SE-220 07 Lund, Sweden Phone: +46-46-222 46 66
More informationProblems of monetary integration with the euro area:the case of Poland
Problems of monetary integration with the euro area:the case of Poland Prof. Andrzej Kaźmierczak, PhD Warsaw School of Economics Monetary Policy Council Member 1 Contents 1. Conditions of effective functioning
More informationEMPLOYMENT RATE Employed/Working age population (15 64 years)
EMPLOYMENT RATE 198 26 Employed/Working age population (15 64 years 8 % Finland 75 EU 15 EU 25 7 65 6 55 5 8 82 84 86 88 9 92 94 96 98 2 4** 6** 14.4.25/SAK /TL Source: European Commission 1 UNEMPLOYMENT
More information% of GDP
STAT/09/149 22 October 2009 Provision of deficit and debt data for 2008 - second notification Euro area and EU27 government deficit at 2.0% and 2.3% of GDP respectively Government debt at 69.3% and 61.5%
More informationJanuary 2005 Euro-zone external trade deficit 2.2 bn euro 14.0 bn euro deficit for EU25
42/2005-23 March 2005 January 2005 Euro-zone external trade deficit 2.2 14.0 deficit for EU25 The first estimate for euro-zone 1 trade with the rest of the world in January 2005 was a 2.2 billion euro
More informationEconS 327 Test 2 Spring 2010
1. Credit (+) items in the balance of payments correspond to anything that: a. Involves payments to foreigners b. Decreases the domestic money supply c. Involves receipts from foreigners d. Reduces international
More informationSelected Interest & Exchange Rates Wfeekly Series of Charts
Selected Interest & Exchange Rates Wfeekly Series of Charts SEPTEMBER 22,197 Prepared by the FINANCIAL MARKETS SECTION DIVISION OF INTERNATIONAL FINANCE BOARD OF GOVERNORS FEDERAL RESERVE SYSTEM Washington,
More informationJune 2014 Euro area international trade in goods surplus 16.8 bn 2.9 bn surplus for EU28
127/2014-18 August 2014 June 2014 Euro area international trade in goods surplus 16.8 bn 2.9 bn surplus for EU28 The first estimate for the euro area 1 (EA18) trade in goods balance with the rest of the
More informationPan-European opinion poll on occupational safety and health
REPORT Pan-European opinion poll on occupational safety and health Results across 36 European countries Final report Conducted by Ipsos MORI Social Research Institute at the request of the European Agency
More informationCourthouse News Service
14/2009-30 January 2009 Sector Accounts: Third quarter of 2008 Household saving rate at 14.4% in the euro area and 10.7% in the EU27 Business investment rate at 23.5% in the euro area and 23.6% in the
More informationJanuary 2014 Euro area international trade in goods surplus 0.9 bn euro 13.0 bn euro deficit for EU28
STAT/14/41 18 March 2014 January 2014 Euro area international trade in goods surplus 0.9 13.0 deficit for EU28 The first estimate for the euro area 1 (EA18) trade in goods balance with the rest of the
More informationSTAT/12/ October Household saving rate fell in the euro area and remained stable in the EU27. Household saving rate (seasonally adjusted)
STAT/12/152 30 October 2012 Quarterly Sector Accounts: second quarter of 2012 Household saving rate down to 12.9% in the euro area and stable at 11. in the EU27 Household real income per capita fell by
More informationSTAT/14/64 23 April 2014
STAT/14/64 23 April 2014 Provision of deficit and debt data for 2013 - first notification Euro area and EU28 government deficit at 3.0% and 3.3% of GDP respectively Government debt at 92.6% and 87.1% In
More informationOn the Structure of EU Financial System. by S. E. G. Lolos. Contents 1
On the Structure of EU Financial System by S. E. G. Lolos Department of Economic and Regional Development Panteion University Contents 1 1. Introduction...2 2. Banks Balance Sheets...2 2.1 On the asset
More informationCOMMISSION IMPLEMENTING DECISION
L 338/70 Official Journal of the European Union 17.12.2013 DECISIONS COMMISSION IMPLEMENTING DECISION of 9 December 2013 on an additional financial towards Member States fisheries control programmes for
More informationIs harmonization sufficient?
DEPOSIT INSURANCE (DI) AS AN UNCOORDINATED INTERACTION Is harmonization sufficient? Theo Kiriazidis * Head of Research Department Hellenic Deposit and Investment Guarantee Fund (TEKE) * The usual disclaimer
More informationCFA Institute Member Poll: Euro zone Stability Bonds
CFA Institute Member Poll: Euro zone Stability Bonds I. About the Survey... 2 a. Background... 2 b. Purpose and Methodology... 2 II. Full Results... 2 Q1: Requirement of common issuance of sovereign bonds...
More informationTechnical report on macroeconomic Member State results of the EUCO policy scenarios
Technical report on macroeconomic Member State results of the EUCO policy scenarios By E3MLab, December 2016 Contents Introduction... 1 Modelling the macro-economic impacts of the policy scenarios with
More informationRanking Country Page. Category 1: Countries with positive CEP Default Index and positive NTE. 1 Estonia 1. 2 Luxembourg 2.
Overview: Single Results of Euro Countries Ranking Country Page Category 1: Countries with positive CEP Default Index and positive NTE 1 Estonia 1 2 Luxembourg 2 3 Germany 3 4 Netherlands 4 5 Austria 5
More informationEconomics 340 International Economics Prof. Alan Deardorff Second Midterm Exam. Form (KEY) 0. March 27, 2017
Page 1 of 14 (15) Economics 340 International Economics Prof. Second Midterm Exam Form (KEY) 0 March 27, 2017 NAME: Student ID No.: INSTRUCTIONS: READ CAREFULLY!!! 1. Please do not open the exam until
More informationA. INTRODUCTION AND FINANCING OF THE GENERAL BUDGET. EXPENDITURE Description Budget Budget Change (%)
DRAFT AMENDING BUDGET NO. 2/2018 VOLUME 1 - TOTAL REVENUE A. INTRODUCTION AND FINANCING OF THE GENERAL BUDGET FINANCING OF THE GENERAL BUDGET Appropriations to be covered during the financial year 2018
More informationEdexcel (A) Economics A-level
Edexcel (A) Economics A-level Theme 4: A Global Perspective 4.1 International Economics 4.1.8 Exchange rates Notes Exchange rate systems The exchange rate of a currency is the weight of one currency relative
More informationFiscal rules in Lithuania
Fiscal rules in Lithuania Algimantas Rimkūnas Vice Minister, Ministry of Finance of Lithuania 3 June, 2016 Evolution of National and EU Fiscal Regulations Stability and Growth Pact (SGP) Maastricht Treaty
More informationRecent Macroeconomic and Monetary Developments in the Czech Republic and Outlook
Recent Macroeconomic and Monetary Developments in the Czech Republic and Outlook Miroslav Singer Governor, Czech National Bank FORECASTING DINNER 212, Czech CFA Society Prague, 22 February 212 M. Recent
More informationChapter 17 Appendix B
Speculative Attacks and Foreign Exchange Crises Chapter 17 Appendix B In the following two applications, we use our model of exchange rate determination to understand how speculative attacks in both advanced
More informationGovernments and Exchange Rates
Governments and Exchange Rates Exchange Rate Behavior Existing spot exchange rate covered interest arbitrage locational arbitrage triangular arbitrage Existing spot exchange rates at other locations Existing
More informationImpact of Greece Debt Crisis on World Economy
Impact of Greece Debt Crisis on World Economy Kovid Kumar Gupta 1 kovid.gupta@gmail.com Abstract This study aims at exploring the reasons behind the Greece debt crisis that emerged in the 21 st century
More informationPRICE AND COST COMPETITIVENESS
PRICE AND COST COMPETITIVENESS EUROPEAN COMMISSION DIRECTORATE-GENERAL FOR ECONOMIC AND FINANCIAL AFFAIRS *** * *** * The quarterly reports on "Price and Cost Competitiveness" provide a periodic assessment
More informationILO World of Work Report 2013: EU Snapshot
Greece Spain Ireland Poland Belgium Portugal Eurozone France Slovenia EU-27 Cyprus Denmark Netherlands Italy Bulgaria Slovakia Romania Lithuania Latvia Czech Republic Estonia Finland United Kingdom Sweden
More informationChapter 19: What Determines Exchange Rates?
Chapter 19: What Determines Exchange Rates? Introduction Exchange rates over time Long-term trends Medium-term trends Short-term variability Frameworks Asset market approach Purchasing power parity (PPP)
More informationThe Turbulent EMS in the 1990s: What Lessons for Today? Professor of Economics, Université Libre de Bruxelles Senior Fellow, Bruegel
The Turbulent in the 1990s: What Lessons for Today? André Sapir Professor of Economics, Université Libre de Bruxelles Senior Fellow, Bruegel 2 The turbulent 1990s: the incompatible trio July 1990: Full
More informationPRICE AND COST COMPETITIVENESS
PRICE AND COST COMPETITIVENESS EUROPEAN COMMISSION DIRECTORATE-GENERAL FOR ECONOMIC AND FINANCIAL AFFAIRS *** * *** * The quarterly reports on "Price and Cost Competitiveness" provide a periodic assessment
More information