Search Results
Discussion Paper
Emerging Market Capital Flows and U.S. Monetary Policy
Accordingly, in this note we analyze the drivers of EME capital flows, focusing in particular on the role of U.S. monetary policy and other potential factors in the decline in capital flows to EMEs since 2010.
Working Paper
Estimating the long-run user cost elasticity for a small open economy: evidence using data from South Africa
This paper estimates the long run elasticity of the demand for fixed nonresidential capital (both equipment and structures) to changes in its user cost using a quarterly panel of two-digit manufacturing data from South Africa from 1970 to 2001. Using a difference specification that does not rely on cointegration, we find highly significant estimates of the user cost elasticity on the order of -0.80. These estimates contrast sharply with many previous studies that obtained small and/or statistically insignificant estimates of the user cost elasticity using U.S. data. This discrepancy may owe ...
Working Paper
The Asian financial crisis, uphill flow of capital, and global imbalances: evidence from a micro study
This study assesses the role of the Asian financial crisis of the late 1990s in the emergence and persistence of the large current account surpluses across non-China emerging Asia, which have been a significant counterpart to the U.S. current account deficit. Using panel data encompassing nearly 3,750 firms, we trace the current account surpluses to a marked and broad-based decline in corporate expenditures on fixed investment in the aftermath of the crisis that cuts across a wide spectrum of countries, industries, and firms. The lower corporate spending in turn depressed aggregate investment ...
Working Paper
The role of China in Asia: engine, conduit, or steamroller?
This paper assesses China's role in Asia as an independent engine of growth, as a conduit of demand from the industrial countries, and as a competitor for export markets. We provide both macroeconomic and microeconomic evidence. The macroeconomic analysis focuses on the impact of U.S. and Chinese demand on the output of the Asian economies by estimating growth comovements and VARs. The results suggest an increasing role of China as an independent source of growth. The microeconomic analysis decomposes trade into basic products, parts and components, and finished goods. We find a large role ...
Working Paper
Changes in job quality and trends in labor hours
Many economic models featuring labor supply decision, especially in macroeconomic analysis, assume away heterogeneity in the nature of work, or assume that the nature of work is irrelevant to the labor/leisure choice. This paper studies the macroeconomic implications of relaxing this assumption. Estimation from micro data using labor hours, wages, consumption, and nonpecuniary job characteristics suggests that labor supply responds to differences and to changes in the nature of work. Ceteris paribus, some job characteristics induce more labor hours than others do. Labeling the jobs that embed ...
Working Paper
International Financial Spillovers to Emerging Market Economies: How Important Are Economic Fundamentals?
We assess the importance of economic fundamentals in the transmission of international shocks to financial markets in various emerging market economies (EMEs). Our analysis covers the so-called taper-tantrum episode of 2013 and six earlier episodes of severe EME-wide financial stress since the mid-1990s. Cross-country regressions lead us to the following results: (1) EMEs with relatively better economic fundamentals suffered less deterioration in financial markets during the 2013 taper-tantrum episode. (2) Differentiation among EMEs set in quite early and persisted throughout this episode. ...
Working Paper
Effects of financial autarky and integration: the case of the South Africa embargo
The economic embargo imposed on South Africa between 1985 and 1993 brought the country closer to financial isolation. This paper interprets the imposition and removal of the embargo as financial autarky and financial integration ?natural experiments?, and studies the effects on the economy. The aggregate data indicate a decrease in the levels and growth rates of investment, capital, and output during the embargo period relative to the pre-embargo and post-embargo periods. To further rationalize the findings in the aggregate data, we calibrate a neoclassical growth model to the South African ...
Working Paper
South Africa's post-apartheid two-step: social demands versus macro stability
During Apartheid, there was little need for redistributional policies or to borrow for public works since the vast majority of the population was underserved. With the arrival of a representative democracy in 1994, however, South Africa faced a unique problem--providing new and improved public services for the majority of its citizens while at the same time ensuring that filling this void would not undermine macroeconomic stability. Over the past fifteen years, policy makers have achieved macrostability, but progress on social needs has been below expectations and South Africa continues to ...
Working Paper
Monetary policy in emerging market economies: what lessons from the global financial crisis?
During the 2008-2009 global financial crisis, emerging market economies (EMEs) loosened monetary policy considerably to cushion the shock. In previous crises episodes, by contrast, EMEs generally had to tighten monetary policy to defend the value of their currencies, to contain capital flight, and to bolster policy credibility. Our study aims to understand the factors that enabled this remarkable shift in monetary policy, and also to assess whether this marks a new era in which EMEs can now conduct countercyclical policy, more in line with advanced economies. The results indicate ...
Discussion Paper
The Long Road to Countercyclical Monetary Policy in Emerging Market Economies
During the global financial crisis (GFC) of 2008-09, central banks in both advanced and emerging market economies (EMEs) lowered policy rates to cushion the adverse shock and to spur economic activity.