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262. Notes on Equilibrium Exchange Rates: January 2010
- Author:
- William R. Cline and John Williamson
- Publication Date:
- 01-2010
- Content Type:
- Policy Brief
- Institution:
- Peterson Institute for International Economics
- Abstract:
- In June 2009 we issued our annual update of estimates of fundamental equilibrium exchange rates (FEERs) for 34 major economies (Cline and Williamson 2009). At that time the dollar had already begun correction from the substantial overvaluation that had arisen from the strong safe-haven effect associated with the global financial crisis of 2008–09. In this policy brief we report on changes in disequilibria in the exchange markets since the date those earlier calculations referred to, namely March 2009. We first present estimates of the extent of movement toward FEER-consistent bilateral dollar exchange rates from March to December 31, 2009, and then look at how effective exchange rates have altered in the same period. We also re-estimate the FEER-consistent dollar rate for one important currency, the Korean won.
- Topic:
- Economics, Foreign Exchange, International Political Economy, and Monetary Policy
- Political Geography:
- Korea
263. New PPP-Based Estimates of Renminbi Undervaluation and Policy Implications
- Author:
- Arvind Subramanian
- Publication Date:
- 04-2010
- Content Type:
- Policy Brief
- Institution:
- Peterson Institute for International Economics
- Abstract:
- Is there reason to add to the proliferating set of estimates on the extent of renminbi undervaluation (see among others, Bergsten 2010; Cline and Williamson 2008 and 2010; Goldstein and Lardy 2008 and 2009; Frankel 2008; Reisen 2009; and Lee et al. 2008)? Yes, not least because these new estimates: (1) suggest that purchasing power parity (PPP)-based approaches to measuring renminbi undervaluation suggest that China's currency is undervalued by about 30 percent against the dollar and not the 12 percent recently reported (Bajaj 2010); and (2) are closer to and consistent with alternative approaches to estimating renminbi undervaluation.
- Topic:
- Economics, Foreign Exchange, International Political Economy, and Monetary Policy
- Political Geography:
- China
264. The Substitution Account as a First Step Toward Reform of the International Monetary System
- Author:
- Peter B. Kenen
- Publication Date:
- 03-2010
- Content Type:
- Policy Brief
- Institution:
- Peterson Institute for International Economics
- Abstract:
- Today, the international monetary system is based largely on the US dollar, but reserve currency diversification has begun, thanks to the advent of the euro, and it is apt to continue. Eventually, the renminbi could acquire reserve currency status, and the resulting reserve currency diversification could be more disruptive than it has been to date. To forestall that possibility the quasi-currency issued by the International Monetary Fund (IMF), Special Drawing Rights (SDRs), could be made to play a larger role in the international monetary system, precluding potentially disruptive diversification and achieving more orderly growth in the stock of international reserves.
- Topic:
- Economics, International Political Economy, International Trade and Finance, and Monetary Policy
- Political Geography:
- United States
265. The Winter of Their Discontent: Pyongyang Attacks the Market
- Author:
- Stephan Haggard and Marcus Noland
- Publication Date:
- 01-2010
- Content Type:
- Policy Brief
- Institution:
- Peterson Institute for International Economics
- Abstract:
- On November 30, 2009, North Korea announced a reform to replace all currency in circulation with new bills and coins. North Korean officials have made no bones about their motivations: The “reform” constitutes a direct attack on the emerging market economy and the independence from state control that it represents. In an interview following the conversion, an official of the North Korean central bank noted that the reform was aimed at curbing private trade and underlined that North Korea is “not moving toward a free market economy but will further strengthen the principle and order of socialist economic management.”
- Topic:
- Economics, Markets, and Monetary Policy
- Political Geography:
- North Korea
266. Lessons from the Asian Monetary Fund for the European Monetary Fund
- Author:
- Yonghyup Oh
- Publication Date:
- 04-2010
- Content Type:
- Policy Brief
- Institution:
- Centre for European Policy Studies
- Abstract:
- The euro area is facing a challenge with Greece in danger of falling into sovereign default and some of its other members, the so-called 'GIPSY' nations, finding themselves in serious financial distress. Creation of a European Monetary Fund to deal more effectively with this type of situation is gaining support. This paper draws lessons from the Asian experience that might be applied to the current European development.
- Topic:
- Debt, Economics, International Trade and Finance, and Monetary Policy
- Political Geography:
- Europe
267. What now for the 'peripheral' Eurozone countries?
- Publication Date:
- 05-2010
- Content Type:
- Working Paper
- Institution:
- Oxford Economics
- Abstract:
- Over the weekend the EU put together a large-scale package worth up to €720 billion aimed at stabilising all the 'peripheral' Eurozone countries, in the face of mounting contagion risks. This came on top of an earlier financial support package for Greece worth €110 billion. The latest move has brought some relief to bond markets, but major challenges remain. Investors remain concerned about the capacity of Greece to stick to the immense fiscal adjustment needed in the face of a very deep recess ion and mounting social unrest. With the debt/GDP ratio set to keep rising to almost 150% in the next few years, concerns remain that some kind of debt restructuring or default cannot be avoided. For the other peripherals, too, the outlook remains bleak – while the immediate threat of a collapse in their debt markets has been averted, years of fiscal austerity and slow growth remain ahead.
- Topic:
- Debt, International Political Economy, Global Recession, Monetary Policy, and Financial Crisis
- Political Geography:
- Greece
268. Towards a Euro(pean) Monetary Fund
- Author:
- Daniel Gros and Thomas Mayer
- Publication Date:
- 05-2010
- Content Type:
- Policy Brief
- Institution:
- Centre for European Policy Studies
- Abstract:
- The case of Greece has ushered in the second phase of the financial crisis, namely that of sovereign default. Members of the euro area were supposed to be shielded from a financial market meltdown. But, after excess spending during the period of easy credit, several euro area members are now grappling with the implosion of credit-financed construction and consumption booms. Greece is the weakest of the weak links, given its high public debt (around 120% of GDP), compounded by a government budget deficit of almost 13% of GDP, a huge external deficit of 11% of GDP and the loss of credibility from its repeated cheating on budget reports.
- Topic:
- Economics, Monetary Policy, and Financial Crisis
- Political Geography:
- Europe
269. Regulatory Challenges for the EU Asset Management Industry
- Author:
- Karel Lannoo
- Publication Date:
- 04-2010
- Content Type:
- Policy Brief
- Institution:
- Centre for European Policy Studies
- Abstract:
- The European asset management industry is feeling squeezed from all sides, as a result of growing prudential, product and conduct regulation. A new Directive, UCITS IV, has only just been enacted, and already new challenges are emerging in the regulation of hedge and venture capital funds, the review of the regulatory regime for depositaries (or financial custodians) and amendments to the MiFID Directive.2 In addition, a new European supervisory framework is in the making, which implies much stricter controls on enforcement. These changes are taking place in the context of one of the largest declines suffered by the industry in the last two decades, from which many fund managers have not yet recovered. The era of light regulation is thus definitely over.
- Topic:
- Markets, Monetary Policy, and Financial Crisis
- Political Geography:
- Europe
270. The G20 Framework for Strong, Sustainable And Balanced Growth: A Study in Credible Cooperation
- Author:
- Daniel Schwanen
- Publication Date:
- 06-2010
- Content Type:
- Working Paper
- Institution:
- Centre for International Governance Innovation
- Abstract:
- The G20 has launched far-ranging reforms of economic governance institutions and the manner in which key economies should cooperate in the future. Its ambitious aim is not only to stabilize the world economy following the economic crisis of 2007-09, but also to anticipate and, as far as possible, prevent future crises and foster sustainable growth going forward. A central element of the promised reform is the “Framework for Strong, Sustainable and Balanced Growth,” introduced at the 2009 summit in Pittsburgh, in which the G20 agreed to accept joint and individual responsibility for the health of the global economy. By specifying the key elements of growth, agreeing to assess their policies mutually with the help of the International Monetary Fund (IMF) and other institutions and agreeing to discuss actions required in light of these assessments, the G20 leaders have launched a potentially effective vehicle for delivering on their promises.
- Topic:
- Economics, International Cooperation, International Organization, Monetary Policy, and Financial Crisis