As the one Latin American emerging market country that has steadfastly adhered to a fixed exchange rate for more than a decade, this article examines the economic and political trade-offs that peso-dollar parity has entailed. In economic terms, the currency board has clearly fostered macroeconomic stability and fiscal prudence. Yet, the maintenance of a fixed currency regime in the context of volatile capital flows has also contributed to the steady appreciation of the peso over time. This trend, along with certain political deals (slow labor market reform and generous government transfers to the provinces) struck at the outset of the reform program, has greatly hampered the productivity and dynamism of the economy. (Rev Econ Pol/DÜI)
The euro has been tested by the emergency of the economic & financial crisis that begun in 2007. The impact on the single currency was so strong that is common to doubt its endurance as the currency of the European economies. With the increasing of the current crisis & the differences within the eurozone two questions emerge: if the single currency is a reasonable project & if is a stable & durable project. Adapted from the source document.
In this paper we propose a dynamic stochastic general equilibrium model to evaluate …financial adjustments that some emerging market economies went through to overcome external crises during the latest decades, such as default and local currency devaluation. We assume that devaluation can be used to avoid external debt default, to improve trade balance and to reduce the real public debt level denominated in local currency. Such effects increase the government ability to deal with external crisis, but also have costs in terms of welfare, related to expected in‡flation, reductions in private investments and higher interest to be paid over the public debt. We conclude that openness improves expected welfare as it allows for a better devaluation-response technology against crises. We also present results for 32 middle-income countries, verifying that the proposed model can indicate, in a stylized way, the preferences for default-devaluation options and the magnitude of the currency depreciation required to overcome 48 external crises occurred as from 1971. Finally, as we construct our model based on the Cole-Kehoe self-fulfilling debt crisis model, adding local debt and trade, it is important to say that their policy alternatives to leave the crisis zone remains in our extended model, namely, to reduce the external debt level and to lengthen its maturity. ; Com base em uma versão estendida do modelo Cole and Kehoe, avaliamos eventos de default e de desvalorizações cambiais. Historicamente, as desvalorizações têm ajudado na superação de crises financeiras ao estimular a balança comercial e ao reduzir o valor real da divida publica denominada em moeda nacional. Por outro lado, a expectativa de uma possível desvalorização produz efeitos negativos sobre o bem-estar: aumento do custo da divida e redução do nível de investimento privado. Modelamos esses trade-offs e mostramos que a abertura comercial melhora o bem-estar ao potencializar o efeito da desvalorização de câmbio sobre a balança comercial. Computamos simulações numéricas baseadas em 48 crises ocorridas em 32 países, e obtivemos resultados alinhados com as desvalorizações e os defaults observados desde 1971.
This paper aims at discussing critically Persio Arida's proposal of adopting currency convertibility in Brazil. Arida (2003a, 2003b, 2004) points out that currency convertibility would make for lower domestic interest rates in Brazil, as well as for lower interest rates for the Brazilian external bonds. Besides, currency convertibility would stabilize capital flows, as well as exchange rate volatility in Brazil. We argue in this paper that this proposal does not lead necessarily either to less exchange rate volatility, or to lower interest rates. Besides, we close the paper by presenting some alternatives in terms of capital controls in Brazil. (Rev Econ Polit/DÜI)
Nowadays, influenced by the European experience, several Brazilian economies have given special attention to the possibility of a currency union among the countries of Mercosul. This paper makes a brief analysis of the main theoretical aspects that represent the basis for the proposition of a currency area. Besides this, the paper shows two distinct views in the national literature concerning the hypothesis of the creation of a currency area for the Mercosul. The main conclusion of this article is that the proposal mentioned above is not feasible, because the costs of macroeconomic coordination are too high. (Rev econ polit/DÜI)
This paper studies the process of internationalization of the Chinese currency, the renminbi (rmb), in the International Monetary System (ims). Looking at the rmb's history of internationalization, and the instruments that the Chinese government has been using in the process, it becomes clear that China boosts its currency through actions that try to avoid overexposure of the capital and financial accounts, and thus the negative impact that markets dominated by Wall Street agents can have on its economy. Thus, the rmb internationalization process is different from that of all currencies that underwent internationalization during the aegis of the Dollar Wall Street Regime (dwsr), as it cannot be substantially controlled by international markets. It is thus interpreted that this process can be seen as a form of contestation of global financial markets, of the role of the dollar and the exercise of us power in the financial and monetary system. ; En este trabajo se investiga el proceso de inserción de la moneda china, el renminbi (rmb), en el Sistema Monetario Internacional (smi). Al analizar el histórico de internacionalización del rmb y los instrumentos que el gobierno chino ha utilizado para esto, se observó que China impulsa su moneda por medio de acciones que intentan evitar una sobreexposición de la cuenta capital y financiera, y, por lo tanto, el impacto negativo que los mercados, dominados por los agentes de Wall Street, pueden producir sobre su economía. De este modo, el proceso de internacionalización del rmb es diferente del de todas las monedas que pasaron por internacionalización durante la égida del Dollar Wall Street Regime (dwsr), pues no puede ser sustancialmente controlado por los mercados internacionales. Se interpreta así que esa inserción monetaria puede ser vista como una forma de contestación a los mercados financieros globales, al papel del dólar y al ejercicio del poder de Estados Unidos en el sistema financiero y monetario. ; Neste trabalho investigou-se o processo de inserção da moeda chinesa, o renminbi (rmb), no Sistema Monetário Internacional (smi). Ao analisarmos o histórico de internacionalização do rmb, e os instrumentos que o governo chinês tem utilizado para tal, percebeu-se que a China impulsiona sua moeda por meio de ações que tentam evitar uma exposição demasiada da conta capital e financeira, e, portanto, o impacto negativo que os mercados, dominados pelos agentes de Wall Street, podem produzir sobre sua economia. Desse modo, o processo de internacionalização do rmb é diferente do de todas as moedas que passaram por internacionalização durante a égide do Dollar Wall Street Regime (dwsr), pois não pode ser substancialmente controlado pelos mercados internacionais. Interpreta-se assim que essa inserção monetária pode ser vista como uma forma de contestação aos mercados financeiros globais, ao papel do dólar e ao exercício do poder dos eua no sistema financeiro e monetário.
This paper examines the symbolic character of the Brazilian new currency, the Real, whose name suggests its ambition to not only represent a value, but be a reality itself. Moreover, the utilization of natural pictures instead of historical scenes on the stamp of the new bills points out the wish of giving the character of reality to the currency launched in 1994, meanwhile it marks inflation as a product of disordered imagination. On that account, the new currency's symbolic representation matches very well with the political discourse that sustains the Real. (Rev Econ Polit/DÜI)
The balance-of-payment crisis literature can offer the basis to understand the current economic turmoil in Brazil. According to the author's calculations, the real exchange rate requires a 15% to 20% devaluation so as to assure that the intertemporal balance-of-payments constraint is not violated. Such appreciated currency imposes a heavy burden on monetary policy: Covered interest parity implies high real domestic interest rates in order to finance the current account. Yet the existence of a large budget deficit imposes objective limits on the use of interest rates as a means to defend the currency. (Rev Econ Polit/DÜI)
Determinative common factors of currency and financial crisis. This paper identifies and evaluates determinative common factors of currency and financial crisis in relation to 86 crises episodes between 1970-2004, based on factor analysis, cluster and discriminant analysis. One evidenced that the rise of the ratios of domestic credit, fiscal deficit and residents bank deposits to the GDP is inherent to the different types of crises classified for economic literature. It was also identified as common factors to these episodes some indicators that capture the excessive monetary expansion of the economies and that reflect the fall in international reserves, represented by M2/Reserves and Imports/Reserves ratios and also the total volume of international reserves. (Rev Econ Polit/GIGA)
This paper examines the experiences in the operation of a currency board in North Russia, Hong Kong and Estonia, and discusses the pros and cons of its implementation in Brazil. (Rev Econ Polit/DÜI)
