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CHINA: Producer-level deflation will ease further
CHINA: Factory-gate deflation will ease further
CHINA: Producer price deflation will ease further
Throughout the 1990s, the supply of new condominiums in Tokyo significantly increased while prices persistently fell. This article investigates whether the market power of…
Abstract
Throughout the 1990s, the supply of new condominiums in Tokyo significantly increased while prices persistently fell. This article investigates whether the market power of condominium developers is a factor in explaining the outcome in this market and whether there is a relationship between production cost trend and the degree of market power that the developers were able to exercise. In order to respond to these questions, we construct and structurally estimate a dynamic durable goods oligopoly model of the condominium market – one incorporating time-variant costs and a secondary market – using a nested GMM procedure. We find that the data provide no evidence that firms in the primary market have substantial market power in this industry. Moreover, the counterfactual experiment provides evidence that inflationary and deflationary expectations on production cost trends have asymmetric effects to the market power of condominium producers. The increase in their markup when cost inflation is anticipated is significantly higher than the decrease in the markup when the same magnitude of cost deflation is anticipated.
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The article provides a comparative critique of the financial underpinnings of the Great Depression of the 1930s and the recent wave of financial crises. The collapse of the…
Abstract
The article provides a comparative critique of the financial underpinnings of the Great Depression of the 1930s and the recent wave of financial crises. The collapse of the financial systems in many developing nations, the bankruptcies in the Anglo-Saxon corporate sectors and a threat of more sovereign defaults on behalf of emerging markets suggest that the current wave of global financial fragility and recession rivals that of the Great Depression of the 1930s. The paper examines key elements that account for the crisis-prone nature of global capitalism: the political discipline of neo-liberalism, debt-driven expansion of the privatised financial markets, and the profound disarticulation of the financial and real economies. These factors suggests that the risk of a global depression is by no means hypothetical, and unless effective and collaborative efforts are made to tame the inherently unstable regime of global finance, even major world economies are faced with a prolonged period of financial turbulence and economic stagnation. The paper concludes by pondering the possibility of a paradigmatic shift in the transnational political consensus that can prevent a global repetition of the 1930s. While the increased awareness of financial instability and crisis may indeed prompt some ad hoc adjustments in national and foreign economic policies of major capitalist powers, in the long run these measures will be insufficient to prevent a major financial and economic disaster.
Jan Černohorský, Liběna Černohorská and Petr Teplý
The aim of this chapter is to describe the purpose of the introduction of the exchange rate commitment by the Czech National Bank (CNB) in the period from November 2013 to April…
Abstract
The aim of this chapter is to describe the purpose of the introduction of the exchange rate commitment by the Czech National Bank (CNB) in the period from November 2013 to April 2017 and its effects on the real economy. The main reason for introducing the exchange rate commitment was concern about the possibility of a prolonged deflationary period in Czechia. Given that the standard monetary policy instruments had already been exhausted on easing the monetary policy conditions, the CNB Bank Board opted for an exchange rate commitment. The secondary objective of the exchange rate commitment was to boost the economy through the positive effect of a weaker koruna on exports. Next, we focus in more detail on the effect of the exchange rate commitment in the economy and the course of the foreign exchange interventions. Overall, we can summarize that the CNB's foreign exchange interventions were an extraordinary monetary policy instrument – in a market economy with inflation targeting and a flexible exchange rate – used in extraordinary times.
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CHINA: Deflation risk looms
Are we now entering the era of a new type of economy, with new rules? What we perceive is more than just an addition to today’s economics. By removing the effects of distance, and…
Abstract
Are we now entering the era of a new type of economy, with new rules? What we perceive is more than just an addition to today’s economics. By removing the effects of distance, and giving more equal access across nations and classes, networks will effectively reengineer our basic economic equations. Electronic networks can provide access to skills, work and commerce at much lower cost, via electronic markets in jobs, products, services and education. At the same time, they introduce new economic behaviour, as a large enough quantitative change becomes a qualitative change. Electronics and optics enable the networking of human capital, expanding its application and accelerating its enrichment via education. So knowledge‐based operations may slowly replace traditional capital‐based assets. Consequently, the conventional process for the creation of wealth with its prerequisites for capital investment is revised:economic value in traditional fixed assets is replaced by “electronic assets”. At the same time, the network effect pushes the market mechanism to its limits, through a step‐change in breadth of access, reduced costs of entry and pace of trading. National differences and national markets, all the trappings and devices of commercial locality, are challenged. In this first of two articles, the initial conditions and the evidence for change are examined and the emergence of a new form of economy, or “tele‐economy”, is reviewed. Following from this, a view of the form of capitalism driving the economic environment – “electronic capitalism” – is put forward. The second article, to be published in a forthcoming issue of foresight, examines the consequences and conclusions on assets, wealth accumulation, national players and the benefits and dangers of a tele‐economy.
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Sarah Elkhishin and Mahmoud Mohieldin
This paper aims to assess to what extent the COVID-19 shock is expected to create a debt crisis in emerging markets and developing economies (EMDEs) through two main questions…
Abstract
Purpose
This paper aims to assess to what extent the COVID-19 shock is expected to create a debt crisis in emerging markets and developing economies (EMDEs) through two main questions: what are the main determinants of EMDEs external vulnerability? How vulnerable are EMDEs to the current COVID-19 shock compared to the global financial crisis (GFC)?
Design/methodology/approach
In addition to a descriptive analysis of the determinants of EMDEs external vulnerability, this paper designs two sub-indices of overindebtedness and financial fragility that capture EMDEs’ distinct characteristics. The two sub-indices together illustrate the overall external vulnerability to the current shock.
Findings
EMDEs are more vulnerable compared to the GFC era. Current debt threats arise mainly from debt architecture and the domination of volatile debt forms – primarily foreign currency-denominated bonds. Excessive fear of debt-deflation spirals after the GFC prompted EMDEs to expand their growth trajectories through a pattern of cheap private lending, loose measures and unmonitored fiscal expansion.
Research limitations/implications
Conclusive post-crisis data are still unavailable.
Practical implications
EMDEs need to balance between temporary accommodative measures and a post-shock policy mix that prevent a deflation spiral without worsening indebtedness and financial fragility. Moreover, financial prudence in face of growing credit demand is crucial, particularly in light of the monetary expansion and injected liquidity.
Originality/value
The indices offer a framework for examining external vulnerability in EMDEs based on theoretical and historical revisions, IMF benchmarks and EMDEs specific debt characteristics. The indices components can be offered for empirical examination in separate future research once conclusive data become available.
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HUNGARY: MNB will 'do what it takes' vs deflation