Suchergebnisse

Throughout the turbulence in the international financial system, eastern Caribbean countries have enjoyed remarkable monetary and economic stability. This paper attempts to characterize the types of structural shocks in the Eastern Caribbean Currency Union (ECCU) and other countries in the region and compare them with other currency unions such as the African Financial Community (CFA) franc zone and the Eurozone. Mundell's criteria on the optimum currency area (OCA) are examined by using a 2-variable structural vector autoregressive (SVAR) model and estimating the extent of symmetric shocks. We find that the role of regional shocks in explaining domestic outputs among the ECCU countries is comparable to that of the EMU countries and much higher than that of the non-ECCU countries in the same region or the CFA franc zone countries. This suggests that the ECCU countries are structurally similar to each other and thus more likely to be subject to symmetric shocks. Their monetary and exchange arrangements appear to have well served the region and the group of countries satisfies most of the criteria to be categorized as an optimum currency area.

This article seeks to investigate whether the renminbi (RMB) has become grossly undervalued by empirically estimating China's equilibrium real exchange rate for the period 1978–2002. A reduced form based on Edwards's (1989, 1994) developing‐country model is estimated using the Engle‐Granger two‐step method. The results reveal that government expenditure, productivity, and the degree of trade restrictions in the economy affect the RMB. From these variables, the authors then derive the equilibrium rate and the degree of misalignments from it. The investigation shows that there is no evidence that the RMB is significantly undervalued in the last few years of the sample period. (JEL F31, F33, F42)

This paper examines the influence of government ideology, political institutions and globalization on the choice of exchange rate regime via panel multinomial logit approach using annual data over the period of 1974-2004 in a panel of 180 countries: 26 developed and 154 developing. We provide evidence that government ideology, political institutions and globalization are important determinants of the choice of exchange rate regime. In particular, we find that left-wing governments, democratic institutions, central bank independence and financial development increase the likelihood of choosing a flexible regime, whereas more globalized countries have a higher probability of implementing a fixed regime. More importantly, we find that political economy factors have different effects on the choice of exchange rate regime in developed and developing countries. All our results are robust to panel ordered probit model. [Copyright Elsevier B.V.]