Currency
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- 02 Oct 2017
- What Do You Think?
Do Bitcoin and Digital Currency Have a Future?
SUMMING UP Bitcoin has shown to be a powerful digital currency, but the real story of the future is Blockchain, say James Heskett's readers. Open for comment; Comment(s) posted.
- 15 Sep 2017
- Working Paper Summaries
Debt Redemption and Reserve Accumulation
This study examines how reserve accumulation affects governments’ decisions to default. The analysis assumes that countries can accumulate reserves and borrow internationally using their own currency. Results suggest that the optimal level of international reserves is fairly large because their cost is mitigated by valuation-smoothing gains. The model matches some features of Brazil’s economic fluctuations.
- 26 Jun 2017
- Working Paper Summaries
Inventory Management for Mobile Money Agents in the Developing World
Mobile money agents in the developing world face a key inventory management challenge: How much cash and e-float should be held to minimize both stockouts and excess working capital? The authors develop two inventory models and show substantial inventory cost reduction with a large dataset of East African mobile money transactions.
- 17 Nov 2016
- Working Paper Summaries
Sovereign Risk, Currency Risk, and Corporate Balance Sheets
Why would a country default on its sovereign debt when the government could instead inflate it away? The authors argue that a government is more inclined to default than inflate when the currency mismatch of the corporate sector implies large adverse balance sheet effects from a currency depreciation. To make this argument they construct a dataset on the currency composition of emerging market external borrowing. Results show that the corporate sector relies on external foreign currency debt even as sovereigns have swiftly moved toward borrowing in their own currency.
- 06 Dec 2011
- Op-Ed
Greater Fiscal Integration Best Solution for Euro Crisis
Ministers and central bankers are working to solve the debt crisis that threatens the European integration project. Is there hope? There is reason to be optimistic, according to Harvard Business School's Dante Roscini, a former investment banker. Open for comment; 1 Comment(s) posted.
- 16 Dec 2009
- Working Paper Summaries
The End of Chimerica
For the better part of the past decade, the world economy has been dominated by a unique geoeconomic constellation that the authors call "Chimerica": a world economic order that combined Chinese export-led development with U.S. overconsumption on the basis of a financial marriage between the world's sole superpower and its most likely future rival. For China, the key attraction of the relationship was its potential to propel the Chinese economy forward by means of export-led growth. For the United States, Chimerica meant being able to consume more, save less, and still maintain low interest rates and a stable rate of investment. Yet, like many another marriage between a saver and a spender, Chimerica was not destined to last. In this paper, economic historians Niall Ferguson of HBS and Moritz Schularick of Freie Universität Berlin consider the problem of global imbalances and try to set events in a longer-term perspective. Key concepts include: The financial crisis of 2007-2009 marks the beginning of the end of the Chimerican marriage of convenience. The end of Chimerica is desirable, though the divorce needs to be amicable and its costs kept down. Currency adjustments must become a top priority in the international political debate. The world economy's key structural imbalance is that the second-biggest economy in the world has pegged its currency to that of the largest economy at a strongly undervalued exchange rate. A policy of Sino-American competitive devaluation at the expense of U.S. allies in Europe and Japan is politically shortsighted and dangerous for global trade. A renminbi revaluation would help the reorientation of the U.S. economy and potentially allow a quicker exit from the extreme policies currently being implemented by the Fed and the Treasury, which carry uncertain risks for the inflation outlook, global liquidity, and capital flows. A renminbi revaluation would also solve at a stroke the problem of China's excessively large international reserves and dollar exposure. Historically, periodic exchange rate revaluation has been the hallmark of economic success. It is time for China—and its currency—to step up. Closed for comment; 0 Comment(s) posted.
The Real Exchange Rate, Innovation and Productivity
Addressing debates on the effects of real exchange rate (RER) movements on the economy, this study examines manufacturing firm-level effects of medium-term fluctuations, in particular firm-level productivity across a wide range of countries. RER changes have different impacts depending on the export and import orientation of regions and the prevalence of credit constraints. Effects are non-linear and asymmetric, suggesting that the link between RER changes and macroeconomic performance might be much more nuanced than usually thought.