Currency

About: Currency is a research topic. Over the lifetime, 26697 publications have been published within this topic receiving 485370 citations. The topic is also known as: monetary unit & unit of money.

An Analysis of Russia's 1998 Meltdown: Fundamentals and Market Signals

Abstract: ON AUGUST 17, 1998, a little more than a month after an international package of emergency financing and economic reforms was announced, Russia was forced to devalue the ruble.(1) Russia also declared its intention to restructure all official domestic currency debt obligations falling due to the end of 1999 and imposed a ninety-day moratorium on the repayment of private external debt, to aid its commercial banks. The moratorium also applied to these banks' obligations from short positions on currency forward contracts, as well as margin calls on repurchase operations (repos) with foreign banks. Less than three weeks later, on September 2, the Central Bank of Russia (CBR) floated the ruble. By September 9 the exchange rate had reached 21 rubles to the dollar, more than three times the 6.29 rubles to the dollar that had prevailed on August 14. The free fall of the ruble and the disruption in the government's access to market borrowing were costly, with an output decline, bank failures, and a spike in inflation. Russia ended 1998 with an output contraction of 4.9 percent for the year, compared with initial expectations of slight growth. Inflation for the year as a whole was 84 percent, compared with an original target of 8 percent. On the political front, the reformist government of Sergei Kirienko was dismissed in the wake of the devaluation, leading to fears of policy reversals and a return to hyperinflation. In an effort to avoid these economic and political costs and achieve asoft landing for the economy, a $22.6 billion international financing package to support fiscal and structural reforms had been announced on July 13. The package was designed to maintain the preannounced exchange rate band while buying time to implement what were recognized as difficult and time-consuming reforms, through an injection of liquidity into reserves and a swap out of short-term ruble treasury bills (called GKOs) into long-term Eurobonds.(2) The objective of the swap was to address the rollover risk from the maturing of large volumes of GKOs each week, totaling $32.7 billion over the last seven months of 1998. It was envisaged that the announcement of the package would stabilize the market, reduce real interest rates to levels the government could afford, and take the pressure off the exchange rate. Indeed, GKO yields halved the next day but remained in excess of 50 percent, far above the 8 percent inflation target. By July 24, upon completion of the GKO-Eurobond swap, GKO yields had jumped to 66 percent, and they kept rising until the August 17 devaluation. Two factors apparently underlay the decision not to abandon the exchange rate band. First, for the Russians, the attainment of single-digit inflation in early 1998 (twelve-month inflation dipped below 10 percent from February until July) represented a major policy achievement, one that they would abandon only with great reluctance. Second, the recent East Asian experience with devaluation had been bad, especially in Indonesia. During the crises in some of those countries in 1997-98, attempts to float had precipitated free falls of the currency, damaging exposed banks and corporations as well as reducing output and raising inflation, and imposing large welfare costs. As a result, there was strong motivation in the Russian case to try and maintain market sentiment and access until fiscal and structural reforms could deliver results. This soft landing scenario implicitly underpinned the international package, which also recognized that Russia's fiscal and structural problems admitted no quick fixes. The package did not achieve its objectives. Total foreign exchange resources, including reserves and new external borrowings, used to defend the ruble between the first speculative attack in late October 1997 and the September 2, 1998, decision to float the currency amounted to $30 billion, about one-sixth of postcrisis GDP.(3) Russian-era foreign currency debt of the federal government increased by $20. …

The Governance of a Fragile Eurozone

Abstract: When entering a monetary union, member countries change the nature of their sovereign debt in a fundamental way, i.e. they cease to have control over the currency in which their debt is issued. As a result, financial markets can force these countries’ sovereigns into default. In this sense, member countries of a monetary union are downgraded to the status of emerging economies. This makes the monetary union fragile and vulnerable to changing market sentiments. It also makes it possible that self-fulfilling multiple equilibria arise. This paper analyzes the implications of this fragility for the governance of the eurozone. It concludes that the new governance structure – the European Stability Mechanism (ESM), which is intended to be successor starting in 2013 of the European Financial Stability Mechanism (EFSF), created in May 2010 – does not sufficiently recognize this fragility. Some of the features of the new financial assistance are likely to increase this fragility. In addition, it is also likely to present member countries from using the automatic stabilizers during a recession. This is surely a step backward in the long history of social progress in Europe. The author concludes by suggesting a different approach for dealing with these problems.

Current Trends in Sustainability of Bitcoins and Related Blockchain Technology

Abstract: Bitcoin is a digital currency based on a peer-to-peer payment system managed by an open source software and characterized by lower transaction costs, greater security and scalability than fiat money and no need of a central bank. Despite criticisms about illegal uses and social consequences, it is attracting the interest of the scientific community. The purpose of this work is to define and evaluate the current trends of the literature concerned with the sustainability of bitcoin, considering the environmental impacts, social issues and economic aspects. From the analysis it emerges that the transition of the whole monetary system in the new cryptocurrency will result in an unacceptable amount of energy consumed to mine new bitcoins and to maintain the entire virtual monetary system, and probably bitcoin will remain a niche currency. Blockchain, which is the base for a distributed and democratically-sustained public ledger of the transactions, could foster new and challenging opportunities. Sharing the framework of medical data, energy generation and distribution in micro-grids at the citizen level, block-stack and new state-driven cryptocurrencies, may benefit from the wide spread of blockchain-based transactions. Under the perspective of its being a driver of social change, bitcoins and related blockchain technologies may overcome the issues highlighted by numerous detractors.