Search results for "Exchange-rate flexibility"
showing 3 items of 3 documents
The effect of episodes of large capital inflows on domestic credit
2012
This paper analyses the effect of capital inflow surges on the evolution of domestic credit. Using a panel of developed and emerging economies from 1970 to 2007, it is shown that in the two years following the beginning of a capital inflow surge the credit-to-GDP ratio increases by about 2 percentage points. The effect is reversed in the medium-term with the credit-to-GDP ratio decreased by almost 4 percentage points seven years after the initial surge. The paper also finds that the effect is different depending on the type of flows characterising the episode (debt vs. portfolio equity vs. FDI), with large capital inflows that are debt-driven having the largest effect. The results of the pa…
The Economics of Monetary Union: The Theory of Optimum Currency Areas
2013
In the 1960s, the theory of Optimum Currency Areas (OCAs) emerged as a by-product of the theoretical debate between fixed and flexible exchange rates. The OCAs approach singles out an economic characteristic to define an economic domain where there is exchange rate fixity erga intra, while there is exchange rate flexibility erga extra. In an optimum currency area, exchange rates fixity prevails internally without any type of internal or external disequilibrium. Each single characteristic ensures that floating or regular adjustments in nominal exchange rates are neither necessary, efficient nor desirable for stabilisation purposes. The literature proposes several economic criteria: factor mo…
Moving closer? Comparing regional adjustments to shocks in EMU and the United States
2020
Highlights • Interstate migration is the main adjustment channel to labor demand shocks for the US. • EMU countries adjust through changes in labor force participation and unemployment. • Price flexibility is more important as a shock absorber for EMU. • Risk-sharing mechanisms have been more effective in the US than in the EMU. • The strength of these channels has increased for EMU ad declined for the United States.