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.

Regionalization of World Trade and Currencies: Economics and Politics

Abstract: Using the gravity model of bilateral trade and an updated data set covering 1970-1992, we map out the current pattern of regionalization in trade. We also present some estimates of the role that currency links within some major groupings may have played in promoting intragroup trade. Next, we consider the political economy of regionalism. Does it help build political momentum for multilateral liberalization or undermine more general liberalization? We present a simple model that is in the first category: it illustrates one possible beneficial effect of trade blocs as a political building block to further trade liberalization. The result could as easily go the other way, however. Is regionalism a building bloc to global free trade or not? The gravity model estimates provide a tentative assessment. A majority of FTAs, such as ASEAN and Andean group, have increased trade with non-members, even while they have concentrated trade disproportionately with each other. The pattern is mixed, however. Other FTAs, such as EFTA, show evidence of trade diversion. The authors would like to thank Jungshik Kim and Greg Dorchak for excellent research and editorial assistance.

Just How Undervalued is the Chinese Renminbi

Abstract: Given that the value of China's currency has been hot topic recently, this paper explores the equilibrium levels of China's real and nominal exchange rates. Employing a Johansen cointegration framework, we focus on the behavioral equilibrium exchange rate (BEER) and permanent equilibrium exchange rate (PEER) models. Our results suggest that, while the renminbi is somewhat undervalued against the dollar, the misalignment is not nearly as exaggerated as many popular claims.

Honey, I Shrunk the Currency Union Effect on Trade

Abstract: NE of the puzzles in empirical international trade is the difficulty offinding a large and statistically significant negative effect of exchange ratevariability on trade. Business managers (and also policymakers) often claim thatcurrency fluctuations are a major obstacle for international economic integration.Since volatile exchange rates generally imply uncertainty about external returns,large and frequent changes in the exchange rate are widely expected to lower thebilateral amount of trade, holding other things constant. Surprisingly, then, asubstantial body of empirical work has hardly found any association betweenexchange rate volatility and trade. In fact, this empirical result has become bynow so established that most of the latest studies do not aim to weaken thefinding, but rather try to provide explanations for it, such as the availability ofhedging instruments (see, for example, Wei, 1999).Recently, however, Andrew Rose (2000) has turned the puzzle on its head.Analysing the effect of currency unions on trade, he finds that a completeelimination of exchange rate variability not only increases trade, but that theeffect is strikingly large. In particular, Rose finds that two countries that share acommon currency trade three times more with one another than with countriesthat use a different currency.This result, apart from being notable for itself, is particularly interesting forat least two reasons. First, there has been recently a growing tendencytowards the establishment of currency unions. In Europe, twelve countrieshave decided to give up their national currencies for the euro. Moreover, agrowing number of countries seek to cure domestic economic problems byfull dollarisation, i.e. adopting a foreign currency as legal tender. Examplesinclude Ecuador in the case of the US dollar and the former Yugoslavianrepublic of Montenegro in the case of the Deutschmark. Rose’s results, then,

The shadow economy in three Mediterranean countries: France, Spain and Greece. A MIMIC approach

Abstract: This paper offers estimations of the evolution of the shadow economy in three Mediterranean countries, namely France, Spain and Greece. A multiple indicators and multiple causes model based on the latent variable structural theory has been applied. As established by Giles (Working paper on monitoring the health of the tax system, 1995), filtered data to solve the non-stationary problems are used. The model includes the tax burden (both as a whole and disaggregated into direct taxes, indirect taxes and social security contributions), a proxy of regulation burden, theu nemployment rate and self-employment as causes of the shadow economy and the GDP growth rate, the labour force participation ratio and the currency ratio as indicators of the underground economy. The results confirm that unemployment, the fiscal burden and self-employment are the main causes of the shadow economy in these countries, and confirm that an inverse relationship exists between the official GDP growth rate and that of the unofficial economy.