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.

Exchange Rate Regimes in an Increasingly Integrated World Economy

Abstract: This paper examines the consequences of heightened capital mobility and of the integration of developing economies in increasingly globalized markets for the exchange rate regimes of the industrial, developing, and transition economies. It builds upon previous studies by IMF staff on various aspects of the exchange rate arrangements of member countries, consistent with the IMF's role of surveillance over its members' exchange rate policies.

Exchange Rates and Economic Recovery in the 1930s

Abstract: Currency depreciation in the 1930s is almost universally dismissed or condemned. It is credited with providing little if any stimulus for economic recovery in the depreciating countries and blamed for transmitting harmful beggar-thy-neighbor impulses to the rest of the world econonv. In this paper we argue for a radically different interpretation of exchange-rate policy in the 1930s . We document first that currency depreciation was beneficial for the initiating countries. It worked through both the standard supply- and demand-side channels suggested by modern variants of the Keynesian model. We show next that there can in fact be no presumption that currency depreciation inthe 1930s was beggar-thy-neighbor policy. Rather, an empirical analysis of the historical record is needed to determine whether the impact on other countries was favorable or unfavorable. We conclude provisionally on the basis of this analysis that the foreign repercussions of individual devaluations were in fact negative -that the depreciations considered were beggar-thy-neighbor. As we point out, however, this finding does not support the conclusion that competitive devaluations taken by a group of countries were without benefit for the system as a whole. We argue to the contrary that similar policies, had they been even more widely adopted, would have hastened recovery from the Great Depression.

Fiscal Federalism and Optimum Currency Areas: Evidence for Europe from the United States

Abstract: The main aim of this paper is to estimate the extent to which the Federal Government of the United States insures member states against regional income shocks. We find that a one dollar reduction in a region's per capita personal income triggers a reduction in federal taxes of about 34 cents and an increase in federal transfers of about 6 cents. Hence, the final reduction in disposable per capita income is around 60 cents. That is, between one-third and one-half of the initial shock to the region is absorbed by the Federal Government. Taxes respond more strongly to regional imbalances than do transfers. The main mechanism at work is the federal income tax system, which implies that the stabilization process is automatic rather than specifically designed each time there is a cyclical movement in income. Some economists may argue that this regional insurance scheme, provided by the Federal Government, is an important reason why the US system of fixed exchange rates has survived without major difficulties. According to this view, Europeans who look to the United States as a model for Europe should seriously consider the creation (or expansion) of a federal fiscal system at the same time as they create a European Central Bank that issues a unified European currency. The creation of the latter without the insurance mechanism provided by the former could endanger the entire process of monetary unification. Approximate calculations of the impact of the existing European tax system on regional income suggests that a one dollar shock to regional GDP will reduce tax payments to the EC government by half a cent. Hence, the current European tax system has a long way to go before it reaches the 34 cents response of the US system.

Currency Choice and Exchange Rate Pass-Through

Abstract: In the open economy macro literature with nominal rigidities, the currency in which goods are priced has important implications for optimal monetary and exchange rate policy and for exchange rate pass-through. We show, using novel data on currency and prices for U.S. imports, that even conditional on a price change, there is a large difierence in the pass-through of the average good priced in dollars (25%) versus non-dollars (95%). We document this to be the case across countries and within disaggregated sectors. This flnding contradicts the assumption in an important class of models that the currency of pricing is exogenous. We present a model of endogenous currency choice in a dynamic price setting environment and show that the predictions of the model are strongly supported by the data.