More than 20 countries have increased their aggregate foreign exchange reserves and other official foreign assets by an annual average of nearly $1 trillion in recent years. This buildup—mainly through intervention in the foreign exchange markets—keeps the currencies of the interveners substantially undervalued, thus boosting their international competitiveness and trade surpluses. The corresponding [...]
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Posted on January 9th, 2013
Posted on December 17th, 2012
The establishment of the Single Supervisory Mechanism is only one step on a longer path towards European banking union, which itself cannot be considered in isolation from the challenges of fiscal union and political union. Losing the current momentum for the completion of this early step would be unfortunate, not only in itself [...] Posted on December 6th, 2012
Hyperinflation—usually 1,000 percent or more a year—occurs only under very special circumstances: in a disorderly breakup of a currency zone; after wars or revolutions, when monetary or fiscal authorities lack control; and when wild populism prevails. Åslund reviews the historical record and shows that hyperinflation does not arise by mistake but because of [...] Posted on December 5th, 2012
In this semiannual update of their estimates of fundamental equilibrium exchange rates (FEERs), William R. Cline and John Williamson again find that the overvaluation of the dollar and undervaluation of the Chinese renminbi have become much more modest than in previous years, as their current account imbalances have narrowed. Seriously undervalued currencies now [...] Posted on December 3rd, 2012
Financial crises have been followed by different inflation paths which are related to monetary policy and money creation by the banking sector during those crises. Accounting for equilibrium changes and non-linearity issues, the empirical relationship between money and subsequent inflation developments has remained stable and similar in crisis and normal times. This analysis [...] 17 pages
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