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Case study

Francis E. Warnock and Peter Debaere

A hedge-fund strategist had two decisions to make. First, what was the path of core euro zone long-term interest rates likely to be over the next year? Was the dramatic…

Abstract

A hedge-fund strategist had two decisions to make. First, what was the path of core euro zone long-term interest rates likely to be over the next year? Was the dramatic decline in German long rates over the past few years an aberration that would soon be reversed, or was it part of the “new normal” that would persist for some time? Second, how would periphery long rates evolve relative to core rates? That is—the spread between long rates in the likes of Greece, Spain, and Ireland and those in Germany—how would they evolve over the next year? Was the dramatic divergence in euro zone long rates likely to persist, or would the coming year see a continuation of the modest reconvergence that has occurred since mid–2012? He knew many factors influenced long-term interest rates; he would have to use his entire toolkit to address this issue. The evidence was in no way clear-cut. Some factors pointed toward lower German rates, some toward higher, some toward a widening of euro zone spreads (even a dissolution of the euro zone as we know it?), and some toward reconvergence.

Details

Darden Business Publishing Cases, vol. no.
Type: Case Study
ISSN: 2474-7890
Published by: University of Virginia Darden School Foundation

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Book part

Asim K. Karmakar and Sebak K. Jana

India's balance of payments (BoP) has gone though several merits and oddities over its long journey since her liberalization era. On its way forward it has faced three of…

Abstract

India's balance of payments (BoP) has gone though several merits and oddities over its long journey since her liberalization era. On its way forward it has faced three of the world's worst challenges from the global turmoil. Of them, the impact of first crisis on India was minimal. But the other two crises had a tremendous impact on its external sector. In effect, the current and capital account of India's BoP have undergone significant structural changes during these two and a half a decades (1990–1991 to 2014–2015). It is in this context this chapter evaluates the evolution of two and a half decades of India's BoP in the context of global changes and exchange rate fluctuations and instability.

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Article

Amanjot Singh and Manjit Singh

The authors aim to report empirical linkages between the US and Brazil, Russia, India and China (BRIC) financial stress indices catalyzing catalyzing dependent economic…

Abstract

Purpose

The authors aim to report empirical linkages between the US and Brazil, Russia, India and China (BRIC) financial stress indices catalyzing catalyzing dependent economic policy initiatives (an extended version of Singh and Singh, 2017a).

Design/methodology/approach

Initially, the study develops financial stress indices for the respective BRIC financial markets. Later, it captures linkages among the said US-BRIC indices by using Johansen cointegration, vector autoregression/vector error correction models (VECM), generalized impulse response functions, Toda–Yamamoto Granger causality, variance decomposition analyses and bivariate generalized autoregressive conditional heteroskedasticity (GARCH) model under constant conditional correlation framework, in general. Markov regime switching and efficient causality tests proposed by Hill (2007) are also used.

Findings

Overall, there are both short-run and long-run dynamic interactions observed between the US and Indian financial stress indices. For rest of the markets, only short-run interactions are found to be in existence. The time-varying co-movement coefficients report financial contagion impact of the US financial crisis on Russian and Indian financial systems only. Contrary to this, Brazilian and Chinese financial systems are largely exhibiting interdependence with the US financial system. Efficient causality tests report indirect impact of the Russian financial system on Brazilian via auxiliary Indian financial system.

Originality/value

The present study is the first of its kind capturing linkages among the US-BRIC financial stress indices by using diverse econometric models. The results support different market participants and policymakers in understanding effectiveness and implementation of economic policies while considering their cross-market interactions as well.

Details

International Journal of Law and Management, vol. 59 no. 6
Type: Research Article
ISSN: 1754-243X

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Book part

Jean-Pierre Allegret and Aufrey Sallenave

We analyze the determinants of the cyclical position in some Baltics and South-Eastern European countries as well as peripheral European countries over the period…

Abstract

We analyze the determinants of the cyclical position in some Baltics and South-Eastern European countries as well as peripheral European countries over the period 2000–2013. Specifically, we consider a sample of eight economies: Croatia, Estonia, Latvia, and Lithuania for the sub-sample of Baltics and South-Eastern European economies; and Greece, Ireland, Portugal, and Spain for the sub-sample covering EMU peripheral countries. To this end, we proceed in two steps. In the first, we simulate Taylor rules for each studied countries in order to see to what extent the effective monetary policy has suffered from an expansionary bias. Such analysis is conducted for both peripheral and Central, Eastern, and South-Eastern Europe (CESE) countries. In a second step, we compare the simulated Taylor rules for our selected CESE countries with the Eurozone Taylor rule. Our contribution is threefold. First we show that the ineffectiveness of monetary policy to face imbalances – and especially financial imbalances – suggest that the EU should adopt macroprudential measures. Second, the experience of CESE and Peripheral countries suggests that fiscal policy has tended to be pro-cyclical or at least neutral. Third, we underline the importance of using the Macroeconomic Imbalance Procedure as a tool to implement automatic adjustment mechanisms.

Details

Economic Imbalances and Institutional Changes to the Euro and the European Union
Type: Book
ISBN: 978-1-78714-510-8

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Abstract

Details

The Impacts of Monetary Policy in the 21st Century: Perspectives from Emerging Economies
Type: Book
ISBN: 978-1-78973-319-8

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Article

François Mann‐Quirici

Assesses whether the current pattern of relative wage rigidity and labour inertia in Europe is a problematic factor in the successful functioning of the European monetary…

Abstract

Purpose

Assesses whether the current pattern of relative wage rigidity and labour inertia in Europe is a problematic factor in the successful functioning of the European monetary union as viewed by many observers given the absence of interregional fiscal transfer payments.

Design/methodology/approach

Uses econometric methods to test whether the onset of monetary integration in the US and the gold standard in selected countries has increased the pro‐cyclical behaviour of real wages.

Findings

Finds suggestive empirical evidence that indeed a Lucas Critique argument applies such that credibly fixed exchange rate regimes might induce wages to carry the burden of macroeconomic adjustment in lieu of independent monetary policy and/or fiscal transfers.

Originality/value

Makes a novel contribution to the literature by attempting to test for the existence of endogenous adjustment mechanisms based on historical monetary unions analogous to EMU.

Details

Journal of Economic Studies, vol. 32 no. 5
Type: Research Article
ISSN: 0144-3585

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