Campanella: The Internationalization of the Renminbi and the Rise of a Multipolar Currency System

ABSTRACT:

The dollar’s steady depreciation has had little impact on the official reserves of central banks. As scholars of the international monetary system debate whether the dollar can continue to play the dominant role in the international monetary system, actual developments in exchange relations already give reason to expect that the world’s currency regime is changing. Recent measures taken by China to internationalize its renminbi, including several bilateral swap agreements signed with other central banks, have reinforced other eastward trends in the world economy.

In this paper, China’s acceleration of renminbi internationalization is examined. The growth of renminbi-based trade and settlements has made it Asia’s new reference currency, surpassing the US dollar. These developments are mostly due to the effects of the financial crisis and have been supported by the region’s economic and financial integration. As a reference currency of necessity or choice, the emergence of the renminbi in Asia is set to weaken the current global dominance of the US dollar. In conclusion, the paper makes the case that the growth of the renminbi as an international currency could generate a multipolar currency system that balances and distributes responsibilities in a better way than the current currency regime.

 

Available for download here.

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Koch: Constructing a viable EU-GCC partnership

ABSTRACT:

Relations between the European Union (EU) and the Gulf Cooperation Council (GCC) were formalized through the 1988 Cooperation Agreement. Since that period and especially since the decision by the GCC to implement a customs union, relations between the two sides have grown institutionally and become multi-faceted. In addition to broader and deeper official contacts, there is now also a series of project and exchange networks in place which have allowed for better people-to-people interaction. The quantitative improvement has, however, not translated into a qualitative one as well. Free trade area negotiations have never been concluded and a recent Joint Action Programme was not renewed at the 2013 ministerial meeting. What is therefore clear is that common interests are insufficient as drivers of the relationship, hampered by institutional incongruities, normative differences and a preference for bilateralism over multilateralism. Taken together, this raises questions about the degree to which both the EU and the GCC will remain committed to a more comprehensive relationship, especially at the strategic and political level.

 

Available for download here.

Ahmad: Governance and Institutions – The role of multilevel fiscal institutions in generating sustainable and inclusive growth

From the introduction:

This paper focuses on the incentives facing politicians and officials to use public resources efficiently—both their own and from donor agencies, as well as those provided by higher levels of government in the case of sub-national entities. As the recent crisis in Europe has shown, weaknesses in institutions and information flows affect the incentives facing subnational governments and associated central and subnational entities. This has resulted in unsustainable and unproductive investments, leading to a collapse in the overall macroeconomic framework in countries from Ireland to Portugal, Spain, Italy and Greece—and indeed similar influences were at play in the Latin American and Asian crises in the 1990s. The focus had become to attract funds from higher levels, or capital markets, to the detriment of accountability to the relevant electorates, or effectiveness of provision.

An interesting and very valuable paper.  Available for download here.

 

 

Hertel-Fernandez: Who Passes Business’s “Model Bills”?

ABSTRACT:

What kinds of policymakers are most likely to enact legislation drafted by organized business interests? Departing from the business power scholarship that emphasizes structural, electoral, or financial mechanisms for corporate influence, I argue that lawmakers are likely to rely on businesses’ proposals when they lack the time and resources to develop legislation on their own, especially when they also hold an ideological affinity for business. Using two new datasets of “model bills” developed by the American Legislative Exchange Council (ALEC), a policy group that promotes pro- business legislation across the states, I find strong support for this theory across both states and individual legislators. These results indicate that ALEC provides private policy capacity to state legislators who would otherwise lack such support, and relatedly, that low state policy capacity may asymmetrically favor certain organized interests over others – namely the business interests affiliated with ALEC. My findings have implications for the study of business influence in policymaking, as well as state politics.

 

Available for download here.

Basto: A Macro-Prudential Policy for Financial Stability

ABSTRACT:

The recent financial crisis and its impact on the global economy led the analysis and policies conducted so far for financial stability to be questioned. In this context, there is a general agreement that risks related to excessive financial leverage and to signs of speculative bubbles were largely neglected in the period prior to the crisis. This fact has motivated a profound reform in financial regulation and supervision at the international level, aimed at promoting a more efficient identification and prevention of risks and of the various channels that facilitate their propagation. Macro-prudential policy, aimed at preventing and mitigating systemic risk, has a prominent role in these reforms. In this context, several countries have been developing methodologies and an institutional framework appropriate to the implementation of macro-prudential policy. In several countries, including Portugal, this function has been attributed to the central bank. This article analyses the role of macro-prudential policy in the new policy framework for financial stability and the challenges related to its implementation.

 

Available for download here.

Shull: Financial Crisis Resolution and Federal Reserve Governance – Economic Thought and Political Realities

ABSTRACT:

The Federal Reserve has been criticized for not forestalling the financial crisis of 2007-09, and for its unconventional monetary policies that have followed.1 Its critics have raised questions as to whom, if anyone reins-in the Federal Reserve if and when its policies are misguided or abusive; i.e., questions as to governance. This paper traces the principal changes in governance of the Federal Reserve over its history excepting its war-era commitment years to the Treasury. The changes have, for the most part, developed in the wake of economic upheavals, when Federal Reserve policy has, as recently, been challenged. The aim is to identify relevant issues regarding governance, and establish a basis for change, if needed.

Section II briefly reviews the concept of governance. Section III describes the principal governance mechanism established by the Federal Reserve Act in 1913. Section IV traces the passing of this mechanism in the 1920s and 1930s; and congressional efforts to expand oversight in the 1970s. Section V considers the changes in Federal Reserve policies induced by the financial crisis of 2007-09 and the impact of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. Section V evaluates developments over time and their implications.

At its origin, Federal Reserve governance was principally instituted internally through a fragmented system that provided a set of checks and balances. The original arrangement eroded in the 1920s under the pressure of a new mandate for economic stabilization. Subsequent changes have left governance to external measures and, in particular, congressional oversight. External measures, however, have been limited. It is concluded that the absence of fully effective governance poses a threat, not simply to ‘stakeholders,’ but to the independence of the Federal Reserve itself.

 

Available for download here.

Chiang and Cheng: Government ownership and corporate performance – evidence from green technology industry in Taiwan

ABSTRACT:

Taiwan’s green technology industry profitability is high, and the output value growth rate is greater than the global market. However, its credit risk volatility is higher than the average of all industries, indicating that the impact of cost of capital and financing needs is more important than in other industries. This study focused on Taiwan’s green technology industry from 2005 to 2009 and explored the impact of the governance structure of the green technology industry on corporate credit risk and operating effectiveness. Data were sourced from the Taiwan Economic Journal (TEJ) database; 330 samples were used in this study.

The empirical results demonstrated that a good corporate governance structure can reduce the green technology industry’s corporate credit risk and improve operational effectiveness. The study found that government shareholding, trust fund shareholding, and corporate shareholding reveal a supervision effect. However, different governance factors have different incremental effects. The governance structure of the green technology industry with governmental ownership has the greatest incremental effect.
This study also found a U-shaped relationship between the government ownership and corporate performance. Moreover, government ownership has different supervision effects among companies with different levels of innovation capital. Green energy group enterprises or the solar photovoltaic industry can strengthen the supervision
mechanism and improve the governance effect through governmental investment shareholdings.

 

Available for download here.

 

Liao: Whether China’s State-Owned Commercial Banks Constitute “Public Bodies” within the Meaning of Article 1.1 (a) (1) of the Agreement on Subsidies and Countervailing Measures: Analysis of US—Definitive Anti-Dumping and Countervailing Duties on Certain Products from China

ABSTRACT:

US—Definitive Anti-Dumping and Countervailing Duties on Certain Products from China is the initial WTO dispute in which China claims that US-countervailing duties on certain products from China are inconsistent with the obligations of the United States under the Agreement on Subsidies and Countervailing Measures (“SCM Agreement”). In this dispute, the specific meaning of “public bodies” within Article 1.1 (a) (1) of the SCM Agreement and the question of whether China’s state-owned commercial banks (“SOCB”) constitute “public bodies” are the heart of the matter. This thesis will analyze these issues by examining the reports of the Panel and the Appellate Body. In particular, the thesis will argue that the theory of the governmental function advanced by China is much more persuasive than that of govern-mental control in terms of defining “public bodies”. Although China’s SOCBs have gone through several stages of reforms, the majority ownership of them has remained in the hands of the Chinese government. However, SOCBs’ policy-oriented nature has been largely marginalized, and currently they only perform subsidiary governmental functions. In this regard, the conclusion this thesis will attempt to reach is that the WTO system needs to give developing countries like China more policy flexibility in order to upgrade their international trade participation to the level required and followed by developed countries. During the process, developing countries should also make the best use of their latent comparative advantage and the effects of globalization.

 

Available for download here.

China to Diversify SOE Ownership

From Xinhua:

 

The Chinese government’s vow to boost diverse ownership means state-owned enterprise (SOE) reform, experts have told Xinhua.  Ding Yifan, deputy director of the Institute of World Development under the State Council’s Development Research Center, said a communique, issued after a key meeting of the Communist Party of China (CPC) Central Committee, set diverse ownership as the future development direction.

The move is a result of complaints about SOEs’ low efficiency and them receiving too many favors from government, said Ding in a program on Chinese reforms aired on Sunday on China Xinhua News Agency Network Co. Ltd. (CNC).

The external situation is another reason. For example, the United Stated is building a Trans-Pacific Partnership (TPP), which has a rule that forbids SOEs in its free trade zone, he said.

As a result, Chinese SOEs need to change, Ding said.

Bussiere, Cheng, Chinn & Lisack: For a Few Dollars More – Reserves and Growth in Times of Crises

ABSTRACT:

Based on a dataset of 112 emerging economies and developing countries, this paper addresses two key questions regarding the accumulation of international reserves: first, has the accumulation of reserves effectively protected countries during the 2008-09 financial crisis? And second, what explains the pattern of reserve accumulation observed during and after the crisis? More specifically, the paper investigates the relation between international reserves and the existence of capital controls. We find that the level of reserves matters: countries with high reserves relative to short-term debt suffered less from the crisis, particularly if associated with a less open capital account. In the immediate aftermath of the crisis, countries that depleted foreign reserves during the crisis quickly rebuilt their stocks. This rapid rebuilding has, however, been followed by a deceleration in the pace of accumulation. The timing of this deceleration roughly coincides with the point when reserves reached their pre-crisis level and may be related to the fact that short-term debt accumulation has also decelerated in most countries over this period.

 

Available for download here: