No disponible en español
Adalbert Winkler
- 1 October 2012
- WORKING PAPER SERIES - No. 1478Details
- Abstract
- This paper contributes to the literature on liquidity crises and central banks acting as lenders of last resort by capturing the mechanics of dual liquidity crises, i.e. funding crises which encompass both the private and the public sector, within a closed system of financial accounts. We analyze how the elasticity of liquidity provision by a central bank depends on the international monetary regime in which the relevant country operates and on specific central bank policies like collateral policies, monetary financing prohibitions and quantitative borrowing limits imposed on banks. Thus, it provides a firm basis for a comparative analysis of the ability of central banks to absorb shocks. Our main results are as follows: (1) A central bank that operates under a paper standard with a flexible exchange rate and without a monetary financing prohibition and other limits of borrowings placed on the banking sector is most flexible in containing a dual liquidity crisis. (2) Within any international monetary system characterized by some sort of a fixed exchange rate, including the gold standard, the availability of inter-central bank credit determines the elasticity of a crisis country’s central bank in providing liquidity to banks and financial markets. (3) A central bank of a euro area type monetary union has a similar capacity in managing dual liquidity crises as a country central bank operating under a paper standard with a flexible exchange rate as long as the integrity of the monetary union is beyond any doubt.
- JEL Code
- E50 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→General
E58 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Central Banks and Their Policies
- 8 September 2008
- OCCASIONAL PAPER SERIES - No. 95Details
- Abstract
- This paper reviews financial stability challenges in the EU candidate countries Croatia, Turkey and the former Yugoslav Republic of Macedonia. It examines the financial sectors in these three economies, which, while at very different stages of development and embedded in quite diverse economic settings, are all in a process of rapid financial deepening. This manifests itself most clearly in the rapid pace of growth in credit to the private sector. This process of financial deepening is largely a natural and welcome catching-up phenomenon, but it has also increased the credit risks borne by the banking sectors in the three economies. These credit risks are compounded by the widespread use of foreign currency-denominated or -indexed loans, leaving unhedged bank customers exposed to potential swings in exchange rates or foreign interest rates. Moreover, these financial risks form part of a broader nexus of vulnerabilities in the economies concerned, in particular the external vulnerabilities arising from increasing private sector external indebtedness. That said, the paper also finds that the authorities in the three countries have taken several policy actions to reduce these financial and external vulnerabilities and to strengthen the resilience of the financial sectors.
- JEL Code
- F32 : International Economics→International Finance→Current Account Adjustment, Short-Term Capital Movements
F41 : International Economics→Macroeconomic Aspects of International Trade and Finance→Open Economy Macroeconomics
G21 : Financial Economics→Financial Institutions and Services→Banks, Depository Institutions, Micro Finance Institutions, Mortgages
G28 : Financial Economics→Financial Institutions and Services→Government Policy and Regulation - Network
- Eurosystem Monetary Transmission Network
- 7 August 2008
- OCCASIONAL PAPER SERIES - No. 93Details
- Abstract
- This paper reviews selected aspects of economic relations between the EU and Russia, focusing on the impact that the last two waves of EU enlargement have had on Russia, as well as the role of the euro in Russia. The analysis suggests that if EU enlargement has had any diversion effects on trade between the EU and Russia at all, they have been minimal, while robust growth in both the EU and Russia, as well as high oil and gas prices, has boosted trade. Likewise, FDI to and from Russia has increased, with the direct impact of enlargement again difficult to disentangle from other factors. Use of the euro by Russian residents and authorities in international transactions has increased, albeit at an uneven pace. While, in general, the US dollar remains the major foreign currency used by Russian residents, the euro has gained importance as an anchor and reserve currency in Russian exchange rate policies. This has happened in the context of an overall monetary policy strategy aiming at a gradual shift from an exchange rate-oriented monetary policy to inflation targeting.
- JEL Code
- F14 : International Economics→Trade→Empirical Studies of Trade
F15 : International Economics→Trade→Economic Integration
F21 : International Economics→International Factor Movements and International Business→International Investment, Long-Term Capital Movements
F36 : International Economics→International Finance→Financial Aspects of Economic Integration - Network
- Eurosystem Monetary Transmission Network
- 17 June 2008
- OCCASIONAL PAPER SERIES - No. 88Details
- Abstract
- Global financial integration has been associated with divergent patterns of real convergence and the current account in emerging markets. While countries in emerging Asia have been running sizeable current account surpluses, countries in emerging Europe have been facing large current account deficits. In this paper we test for the relevance of financial market characteristics in explaining this divergence in the catching-up process in Europe and Asia. We assume that the two regions constitute distinct convergence clubs, with the euro area and the United States respectively at their core. In line with the theoretical literature, we find that better developed and more integrated financial markets increase emerging markets' ability to borrow abroad. Moreover, the degree of financial integration within the convergence clubs - as opposed to the state of financial integration in the global economy - and the extent of reserve accumulation are significant factors in explaining the divergent patterns of real convergence and the current account in the regions under review.
- JEL Code
- F15 : International Economics→Trade→Economic Integration
F21 : International Economics→International Factor Movements and International Business→International Investment, Long-Term Capital Movements
O16 : Economic Development, Technological Change, and Growth→Economic Development→Financial Markets, Saving and Capital Investment, Corporate Finance and Governance
O52 : Economic Development, Technological Change, and Growth→Economywide Country Studies→Europe
O53 : Economic Development, Technological Change, and Growth→Economywide Country Studies→Asia including Middle East
- 23 April 2007
- OCCASIONAL PAPER SERIES - No. 60Details
- Abstract
- Commodity prices play an important role in economic developments in most of the 24 Western and Central African (WCA) countries covered in this paper. It is confirmed that in the light of rising commodity prices between 1999 and 2005, net oil exporters recorded strong growth rates while net oil-importing countries - albeit benefiting from increases in their major non-oil commodity export prices - displayed somewhat lower growth. For most WCA economies, inflation rates appear less affected by commodity price changes and more determined by exchange rate regimes as well as monetary and fiscal policies. While passthrough effects from international to domestic energy prices were significant, notably in oilimporting countries, second-round effects on overall prices seem limited. Governments of oil-rich countries reacted prudently to windfall revenues, partly running sizable fiscal surpluses. A favourable supply response to rising spending as well as sterilisation efforts and increasing money demand also helped to dampen inflationary pressures. However, substantial excess reserves of commercial banks reflect challenges in financial sector developments and the effectiveness of monetary policy in many WCA countries. Given currently widely used fixed exchange rate regimes, fiscal policy will continue to carry the main burden of macroeconomic adjustment and of sustaining non-inflationary growth, which remains the key policy challenge facing WCA authorities.
- 4 July 2006
- OCCASIONAL PAPER SERIES - No. 48Details
- Abstract
- This paper - based on a report by a Task Force established by the International Relations Committee (IRC) of the European System of Central Banks (ESCB) - reviews macroeconomic and financial stability challenges for acceding (Bulgaria and Romania) and candidate countries (Croatia and Turkey). In an environment characterised by strong growth and capital inflows, the main macroeconomic challenges relate to the recent pick-up of inflation and the large and widening current account deficits. Moreover, rapid credit growth has been a recent feature of financial development in all countries and thus constitutes the main financial stability challenge. In general, monetary authorities have responded to these challenges by tightening monetary conditions and prudential standards, with concrete measures also reflecting the different monetary and exchange rate regimes in the region. The paper also highlights four specific features of fiancial development in the countries under review, namely the dominance of banks in financial intermediation, the strong participation of foreign-owned banks, the widespread use of foreign currencies and the strengthening of supervisory frameworks.
- JEL Code
- E65 : Macroeconomics and Monetary Economics→Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook→Studies of Particular Policy Episodes
G21 : Financial Economics→Financial Institutions and Services→Banks, Depository Institutions, Micro Finance Institutions, Mortgages
G38 : Financial Economics→Corporate Finance and Governance→Government Policy and Regulation
O16 : Economic Development, Technological Change, and Growth→Economic Development→Financial Markets, Saving and Capital Investment, Corporate Finance and Governance
P27 : Economic Systems→Socialist Systems and Transitional Economies→Performance and Prospects
- 29 February 2004
- OCCASIONAL PAPER SERIES - No. 11Details
- Abstract
- Official and unilateral dollarisation/euroisation has become a common policy advice for emerging market economies. Against this background, the paper provides a comprehensive review of all the main cases of dollarisation/euroisation, analysing motives, features and policy implications of this exchange rate regime. The main results are that policies fostering integration with the anchor country, in particular fiscal transfers, tourism and offshore finance, have been crucial in supporting the exchange rate regime. To this end, most dollarised/euroised countries have exploited advantages that are largely prior to the choice of exchange rate regime, namely their small size, geographic proximity to the anchor country, and politically dependent status. Thus, recommending dollarisation/euroisation irrespective of countries’ ex ante degree of integration with the potential anchor country seems to bear considerable risks, as dollarisation/euroisation does not seem to be a straightforward substitute for integration.
- 28 December 2002
- OCCASIONAL PAPER SERIES - No. 7Details
- Abstract
- This paper reviews the economic, monetary and financial relations between the EU and the euro area and a set of countries in a broad set of neighbouring regions. The 80 or so countries are mostly classified as transition, emerging or developing economies and belong to four main regions: the Western Balkans; the European part of the Commonwealth of Independent States; the Middle East and Northern Africa; and Sub-Saharan Africa. In many respects, these countries are diverse; however, some common features can also be identified. One of these common features is the fact that the euro area is their largest trading partner and the largest originator of international bank credit, foreign direct investment and official development assistance; meanwhile, from a euro area perspective, while these countries account for a somewhat smaller share of external trade, they are important as providers of energy, other raw materials and agricultural products.