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Arnaud Mehl
International & European Relations
- Division
International Policy Analysis
- Current Position
-
Adviser
- Fields of interest
-
International Economics
- Other current responsibilities
- 2023-
Member, CEPR Research Policy Network on Geoeconomics
- 2023-
Lecturer, Sciences Po
- 2020-
Research fellow, Centre for Economic Policy Research
- 2018-
Associate Editor, Journal of International Money and Finance
- 2015-
Editorial Board Member, ECB Working Paper Series
- 2013-
Research Associate, Globalization and Monetary Policy Institute, Federal Reserve Bank of Dallas
- Education
- 1997-2000
PhD in Economics, Université Paris-IX Dauphine, Paris, France
- 1998-1999
Visiting Student, University of Oxford, Oxford, UK
- 1993-1996
MA in Political Science, Sciences-Po, Paris, France
- 1992-1995
MA in Business Studies, ESCP Business School, Paris, France
- Professional experience
- 2019-
Adviser - International Policy Analysis Division, Directorate General International and European Relations, European Central Bank
- 2008-2018
Principal Economist - International Policy Analysis Division, Directorate General International and European Relations, European Central Bank
- 2004-2007
Senior Economist - Multilateral, Asia-Pacific and Western Hemisphere Division, Directorate General International and European Relations, European Central Bank
- 2001-2003
Economist - EU Neighbouring Regions Division, Directorate General International and European Relations, European Central Bank
- 2001
Quantitative Analyst - Edmond de Rothschild Group, Paris, France
- 1998-1999
Junior Economist - French Treasury Agency, Vienna, Austria
- Awards
- 2021
Economics in central banking, Central Banking Awards
- 23 April 2024
- WORKING PAPER SERIES - No. 2932Details
- Abstract
- We analyze, for the first time, how firms choose the currency in which they price transactions in international trade of services and investigate, using direct evidence, whether the US dollar (USD) plays a dominant role in services trade. Drawing on a new granular dataset on extra-European Union exports of Portuguese firms broken down by currency, we show that currency choices in services trade are active firm-level decisions. Firms that are larger and rely more on inputs priced in foreign currencies are less likely to use the domestic currency to export services. Importantly, we show that the USD has a dominant role as a vehicle currency in trade of services – but to a lesser extent than in trade of goods – and that this is not just due to differences in the geography of trade. An external validity test based on macro data available for Portugal and six other European countries confirms this finding. In line with predictions from recent theoretical models, our results are consistent with the lower prevalence of USD in services trade arising from a lower openness of services markets and a stronger reliance of services on domestic inputs.
- JEL Code
- F14 : International Economics→Trade→Empirical Studies of Trade
F31 : International Economics→International Finance→Foreign Exchange
F41 : International Economics→Macroeconomic Aspects of International Trade and Finance→Open Economy Macroeconomics
- 13 February 2024
- WORKING PAPER SERIES - No. 2907Details
- Abstract
- We develop a two-country DSGE model with financial frictions to study the transition from a steady-state without CBDC to one in which the home country issues a CBDC. The CBDC provides households with a liquid, convenient and storage-cost free means of payments which reduces the market power of banks on deposits. In the steady-state CBDC unambiguously improves welfare without disintermediating the banking sector. But macroeconomic volatility in the transition period to the new steady-state increases for plausible values of the latter. Demand for CBDC and money overshoot, thereby crowding out bank deposits and leading to initial declines in investment, consumption and output. We use non-linear solution methods with occasionally binding constraints to explore how alternative policies reduce volatility in the transition, contrasting the effects of restrictions on non-residents, binding caps, tiered remuneration and central bank asset purchases. Binding caps reduce disintermediation and output losses in the transition most effectively, with an optimal level of around 40% of steady-state CBDC demand.
- JEL Code
- E50 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→General
E58 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Central Banks and Their Policies
F30 : International Economics→International Finance→General
F41 : International Economics→Macroeconomic Aspects of International Trade and Finance→Open Economy Macroeconomics
- 21 June 2023
- THE INTERNATIONAL ROLE OF THE EURO - BOXThe international role of the euro 2023Details
- JEL Code
- :
- 21 June 2023
- THE INTERNATIONAL ROLE OF THE EURO - SPECIAL FEATUREThe international role of the euro 2023Details
- JEL Code
- :
- 14 June 2022
- THE INTERNATIONAL ROLE OF THE EURO - BOXThe international role of the euro 2022
- 27 July 2021
- WORKING PAPER SERIES - No. 2574Details
- Abstract
- The US dollar plays a dominant role in the invoicing of international trade, albeit not an exclusive one as more than half of global trade is invoiced in other currencies. Of particular interest are the euro, with a large role, and the renminbi, with a rising role. These two currencies are well suited to contrast the roles of economic fundamentals and policies, as European policy makers have taken a neutral stance in contrast to the promotion of the international role of the renminbi by the Chinese authorities. We assess the drivers of invoicing using the most recent and comprehensive data set for 115 countries over 1999-2019. We find that standard mechanisms that foster use of a large economy's currency predicted by theory – i.e. strategic complementarities in price setting and integration in cross-border value chains – underpin use of the dollar and the euro for trade with the United States and the euro area. These mechanisms also support the role of the dollar, but not the euro, in trade between non-US and non-euro area countries, making the dollar the globally dominant invoicing currency. Fundamentals and policies have played a contrasted role for the use of the renminbi. We find that China's integration into global trade has further strengthened the dominant status of the dollar at the expense of the euro. At the same time, the establishment of currency swap lines by the People's Bank of China has been associated with increases in renminbi invoicing, with an adverse effect on dollar use that is larger than for the euro.
- JEL Code
- F14 : International Economics→Trade→Empirical Studies of Trade
F31 : International Economics→International Finance→Foreign Exchange
F44 : International Economics→Macroeconomic Aspects of International Trade and Finance→International Business Cycles
- 2 June 2021
- THE INTERNATIONAL ROLE OF THE EURO - SPECIAL FEATUREThe international role of the euro 2021
- 2 June 2021
- THE INTERNATIONAL ROLE OF THE EURO - SPECIAL FEATUREThe international role of the euro 2021
- 2 June 2021
- THE INTERNATIONAL ROLE OF THE EURO - BOXThe international role of the euro 2021
- 2 June 2021
- THE INTERNATIONAL ROLE OF THE EURO - BOXThe international role of the euro 2021
- 19 November 2020
- WORKING PAPER SERIES - No. 2488Details
- Abstract
- We examine the open-economy implications of the introduction of a central bank digital currency (CBDC).We add a CBDC to the menu of monetary assets available in a standard two-country DSGE model with financial frictions and consider a broad set of alternative technical features in CBDC design. We analyse the international transmission of standard monetary policy and technology shocks in the presence and absence of a CDBC and the implications for optimal monetary policy and welfare. The presence of a CBDC amplifies the international spillovers of shocks to a significant extent, thereby increasing international linkages. But the magnitude of these effects depends crucially on CBDC design and can be significantly dampened if the CBDC possesses specific technical features. We also show that domestic issuance of a CBDC increases asymmetries in the international monetary system by reducing monetary policy autonomy in foreign economies.
- JEL Code
- E50 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→General
F30 : International Economics→International Finance→General
- 20 October 2020
- RESEARCH BULLETIN - No. 76Details
- Abstract
- What does quantitative easing (QE) really mean for the exchange rate? This article explains how the relevant effects can be estimated using a statistical methodology derived from theory. The results suggest that QE has large and persistent effects on the USD/EUR exchange rate, mainly through shifts in exchange rate risk and short-term interest rates between the two currencies. Changes in expectations about the future monetary policy stance, reflecting the “signalling channel” of monetary policy, also affect how the USD/EUR exchange rate responds to QE.
- JEL Code
- F41 : International Economics→Macroeconomic Aspects of International Trade and Finance→Open Economy Macroeconomics
- 14 August 2020
- WORKING PAPER SERIES - No. 2456Details
- Abstract
- This paper presents the most comprehensive and up-to-date panel data set of invoicing currencies in global trade. It provides data on the shares of exports and imports invoiced in US dollars, euros, and other currencies for more than 100 countries since 1990. The evidence from these data confirms findings from earlier research regarding the globally dominant role of the US dollar in invoicing – despite the comparatively smaller role of the US in global trade – and the overall stability of invoicing currency patterns. But the evidence also points to several novel stylised facts. First, both the US dollar and the euro have been increasingly used for invoicing even as the share of global trade accounted for by the US and the euro area has declined. Second, the euro is used as a vehicle currency in parts of Africa, and some European countries have seen significant shifts toward euro invoicing. And third, as suggested by the dominant currency paradigm, countries invoicing more in US dollars (euros) tend to experience greater US dollar (euro) exchange rate pass-through to their import prices; also, their trade volumes are more sensitive to fluctuations in these exchange rates.
- JEL Code
- F14 : International Economics→Trade→Empirical Studies of Trade
F31 : International Economics→International Finance→Foreign Exchange
F44 : International Economics→Macroeconomic Aspects of International Trade and Finance→International Business Cycles
- 30 July 2019
- WORKING PAPER SERIES - No. 2300Details
- Abstract
- Focusing on the foreign exchange reaction to macroeconomic announcements, we show that fast trading is positively and significantly correlated with the entropy of the distribution of quoted prices in reaction to news: a larger share of fast trading increases the degree of diversity of quotes in the order book, for given liquidity, order book depth and size of order flows. Exploiting the WM Reuters’ reform of the fixing methodology in February 2015 as a natural experiment, we provide evidence that fast trading raises entropy, rather than reacting to it. While more entropy in quoted prices means noisier information and arguably complicates price discovery from an individual trader’s perspective, we show that, in the aggregate, more entropy actually brings traded prices closer to the random walk hypothesis, and improves indicators of market efficiency and quality of trade execution. We estimate that a 10 percent increase in entropy reduces the negative impact of macro news by over 60% for effective spreads, against over 40% for realized spreads and price impacts. Our findings suggest that the main mechanism by which fast trading may have desirable effects on market performance specifically hinges on enhanced heterogeneity in trading patterns, best captured by entropy.
- JEL Code
- F31 : International Economics→International Finance→Foreign Exchange
G14 : Financial Economics→General Financial Markets→Information and Market Efficiency, Event Studies, Insider Trading
G15 : Financial Economics→General Financial Markets→International Financial Markets
- 13 June 2019
- THE INTERNATIONAL ROLE OF THE EURO - SPECIAL FEATUREThe international role of the euro 2019
- 13 June 2019
- THE INTERNATIONAL ROLE OF THE EURO - BOXThe international role of the euro 2019
- 25 March 2019
- WORKING PAPER SERIES - No. 2252Details
- Abstract
- Does distance matter for the volatility of international real and financial transactions? We show that it does, in addition to its well-established relevance for the level of trade. A simple model of trade with endogenous markups shows that demand shocks have a larger impact on trade between more distant countries. We test this implication in two steps, relying on a broad range of real and financial transactions measures, as well as several different metrics of distance (physical, linguistic, and internet). We first show that during the Great Trade Collapse of 2007-09 international transactions fell more between countries that are more distant along the various metrics, and find that the different distance measures magnify each other’s respective impacts. We then focus on a longer panel analysis of trade in goods and show that trade is more volatile between more distant countries, with again a magnification pattern across metrics of distance.
- JEL Code
- F10 : International Economics→Trade→General
F30 : International Economics→International Finance→General
- 22 February 2019
- WORKING PAPER SERIES - No. 2246Details
- Abstract
- We analyze the role of economic and security considerations in bilateral trade agreements. We use the pre-World War I period to test whether trade agreements are governed by pecuniary factors, such as distance and other frictions measured by gravity covariates, or by geopolitical factors. While there is support for both hypotheses, we find that defense pacts boost the probability of trade agreements by as much as 20 percentage points. Our estimates imply that were the U.S. to alienate its geopolitical allies, the likelihood and benefits of successful bilateral agreements would fall significantly. Trade creation from an agreement between the U.S. and E.U. countries would decline by about 0.6 percent of total U.S. exports.
- JEL Code
- F13 : International Economics→Trade→Trade Policy, International Trade Organizations
N20 : Economic History→Financial Markets and Institutions→General, International, or Comparative
- 14 November 2018
- WORKING PAPER SERIES - No. 2197Details
- Abstract
- We estimate the effects of quantitative easing (QE) measures by the ECB and the Federal Reserve on the US dollar-euro exchange rate at frequencies and horizons relevant for policymakers. To do so, we derive a theoretically-consistent local projection regression equation from the standard asset pricing formulation of exchange rate determination. We then proxy unobserved QE shocks by future changes in the relative size of central banks’ balance sheets, which we instrument with QE announcements in two-stage least squares regressions in order to account for their endogeneity. We find that QE measures have large and persistent effects on the exchange rate. For example, our estimates imply that the ECB’s APP program which raised the ECB’s balance sheet relative to that of the Federal Reserve by 35 percentage points between September 2014 and the end of 2016 depreciated the euro vis-à-vis the US dollar by a 12%. Regarding transmission channels, we find that a relative QE shock that expands the ECB’s balance sheet relative to that of the Federal Reserve depreciates the US dollar-euro exchange rate by reducing euro-dollar short-term money market rate differentials, by widening the cross-currency basis and by eliciting adjustments in currency risk premia. Changes in the expectations about the future monetary policy stance, reflecting the “signalling” channel of QE, also contribute to the exchange rate response to QE shocks.
- JEL Code
- E5 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit
F3 : International Economics→International Finance - Network
- Research Task Force (RTF)
- 5 July 2017
- THE INTERNATIONAL ROLE OF THE EURO - SPECIAL FEATUREThe international role of the euro 2017
- 5 July 2017
- THE INTERNATIONAL ROLE OF THE EURO - SPECIAL FEATUREThe international role of the euro 2017
- 30 March 2016
- WORKING PAPER SERIES - No. 1889Details
- Abstract
- We analyze the impact of technology on production and trade in services, focusing on the foreign exchange market. We identify exogenous technological changes by the connection of countries to submarine fiber-optic cables used for electronic trading, but which were not laid for purposes related to the foreign exchange market. We estimate the impact of cable connections on the share of offshore foreign exchange transactions. Cable connections between local markets and matching servers in the major financial centers lower the fixed costs of trading currencies and increase the share of currency trades occurring onshore. At the same time, however, they attenuate the effect of standard spatial frictions such as distance, local market liquidity, and restrictive regulations that otherwise prevent transactions from moving to the major financial centers. Our estimates suggest that the second effect dominates. Technology dampens the impact of spatial frictions by up to 80 percent and increases, in net terms, the share of offshore trading by 21 percentage points. Technology also has economically important implications for the distribution of foreign exchange transactions across financial centers, boosting the share in global turnover of London, the world
- JEL Code
- F30 : International Economics→International Finance→General
- 8 July 2015
- THE INTERNATIONAL ROLE OF THE EURO - SPECIAL FEATUREThe international role of the euro 2015
- 13 August 2014
- WORKING PAPER SERIES - No. 1715Details
- Abstract
- We investigate whether the role of national currencies as international reserves was fundamentally altered by the shift from fixed to flexible exchange rates (what we call the
- JEL Code
- F30 : International Economics→International Finance→General
N20 : Economic History→Financial Markets and Institutions→General, International, or Comparative
- 16 July 2014
- THE INTERNATIONAL ROLE OF THE EURO - SPECIAL FEATUREThe international role of the euro 2014
- 2 July 2014
- WORKING PAPER SERIES - No. 1686Details
- Abstract
- This paper reconstructs the forgotten history of mutual assistance among Reserve Banks in the early years of the Federal Reserve System. We use data on accommodation operations by the 12 Reserve Banks between 1913 and 1960 which enabled them to mutualise their gold reserves in emergency situations. Gold reserve sharing was especially important in response to liquidity crises and bank runs. Cooperation among reserve banks was essential for the cohesion and stability of the US monetary union. But fortunes could change quickly, with emergency recipients of gold turning into providers. Because regional imbalances did not grow endlessly, instead narrowing when region-specific liquidity shocks subsided, mutual assistance created only limited tensions. These findings speak to the current debate over TARGET2 balances in Europe.
- JEL Code
- F30 : International Economics→International Finance→General
N20 : Economic History→Financial Markets and Institutions→General, International, or Comparative
- 12 March 2014
- WORKING PAPER SERIES - No. 1651Details
- Abstract
- Conventional wisdom has it that network effects are strong in markets for homogeneous goods, leading to the dominance of one settlement currency in such markets. The alleged dominance of the dollar in global oil markets is said to epitomize this phenomenon. We question this presumption with evidence for earlier periods showing that several national currencies have simultaneously played substantial roles in global oil markets. European oil import payments before and after World War II were split between the dollar and non-dollar currencies, mainly sterling. Differences in use of the dollar across countries were associated with trade linkages with the United States and the size of the importing country. That several national currencies could simultaneously play a role in international oil settlements suggests that a shift from the current dollar-based system toward a multi-polar system in the period ahead is not impossible.
- JEL Code
- F30 : International Economics→International Finance→General
N20 : Economic History→Financial Markets and Institutions→General, International, or Comparative
- 2 July 2013
- THE INTERNATIONAL ROLE OF THE EURO - SPECIAL FEATUREThe international role of the euro 2013
- 2 July 2013
- THE INTERNATIONAL ROLE OF THE EURO - SPECIAL FEATUREThe international role of the euro 2013
- 2 July 2013
- THE INTERNATIONAL ROLE OF THE EURO - SPECIAL FEATUREThe international role of the euro 2013
- 14 May 2013
- WORKING PAPER SERIES - No. 1548Details
- Abstract
- I estimate the transmission of large global volatility shocks in international equity markets from the earlier (pre-1914) to the modern era of globalisation. To that end, I identify 43 such shocks over the period 1885-2011, defined as significant increases in unanticipated volatility in US equity markets, which I relate to well-known historical events. My estimates suggest that the response of global equity markets to these shocks in a panel of 16 countries is both statistically significant and large economically. On average, global equity market valuations correct by about 20% in the month when a shock occurs. There is substantial heterogeneity in responses both across countries and time, however, which can be partly explained by differences in global trade integration. I find no evidence that other potential theoretical determinants, such as output composition, country fundamentals or global policy responses matter, by contrast. These results shed light on a neglected aspect of globalisation, which creates opportunities but also heightens the exposure of economies to acute surges in global uncertainty and risk aversion.
- JEL Code
- F30 : International Economics→International Finance→General
F31 : International Economics→International Finance→Foreign Exchange
N20 : Economic History→Financial Markets and Institutions→General, International, or Comparative
- 17 September 2012
- WORKING PAPER SERIES - No. 1466Details
- Abstract
- We analyze persistence in patterns of bilateral financial investment using data on US investors’ holdings of foreign bonds. We document a “history effect” in which the pattern of holdings seven decades ago continues to influence holdings today. 10 to 15% of the cross-country variation in US investors’ foreign bond holdings is explained by holdings 70 years ago, plausibly reflecting fixed costs of market entry and exit. This effect is twice as large for bonds denominated in currencies other than the dollar, suggesting the existence of even higher fixed costs of initiating US foreign investment in currencies other than the dollar. Our findings point to history and path dependence as key sources of financial market segmentation.
- JEL Code
- F30 : International Economics→International Finance→General
N20 : Economic History→Financial Markets and Institutions→General, International, or Comparative
- 7 May 2012
- WORKING PAPER SERIES - No. 1433Details
- Abstract
- This paper offers new evidence on the emergence of the dollar as the leading international currency, focusing on its role as currency of denomination in global bond markets. We show that the dollar overtook sterling much earlier than commonly supposed, as early as in 1929. Financial market development appears to have been the main factor helping the dollar to surmount sterling
- JEL Code
- F30 : International Economics→International Finance→General
N20 : Economic History→Financial Markets and Institutions→General, International, or Comparative
- 28 October 2011
- WORKING PAPER SERIES - No. 1392Details
- Abstract
- This paper assesses whether the international monetary system is already tripolar and centred around the US dollar, the euro and the Chinese renminbi (RMB). It focuses on what we call China
- JEL Code
- F30 : International Economics→International Finance→General
F31 : International Economics→International Finance→Foreign Exchange
F33 : International Economics→International Finance→International Monetary Arrangements and Institutions
N20 : Economic History→Financial Markets and Institutions→General, International, or Comparative
- 12 September 2011
- WORKING PAPER SERIES - No. 1381Details
- Abstract
- Using the 2007-2009 financial crisis as a laboratory, we analyze the transmission of crises to country-industry equity portfolios in 55 countries. We use an asset pricing framework with global and local factors to predict crisis returns, defining unexplained increases in factor loadings as indicative of contagion. We find evidence of systematic contagion from US markets and from the global financial sector, but the effects are very small. By contrast, there has been systematic and substantial contagion from domestic equity markets to individual domestic equity portfolios, with its severity inversely related to the quality of countries' economic fundamentals and policies. Consequently, we reject the globalization hypothesis that links the transmission of the crisis to the extent of global exposure. Instead, we confirm the old
- JEL Code
- F3 : International Economics→International Finance
G14 : Financial Economics→General Financial Markets→Information and Market Efficiency, Event Studies, Insider Trading
G15 : Financial Economics→General Financial Markets→International Financial Markets - Network
- Macroprudential Research Network
- 9 February 2011
- WORKING PAPER SERIES - No. 1292Details
- Abstract
- This paper provides evidence on whether the creation of the euro has changed the way global turbulences affect euro area and other economies. Specifically, it considers the impact of global shocks on the competitiveness of individual euro area countries and assesses whether their responses to such shocks have converged, as well as to what pattern. Technically, the paper applies a newly developed methodology based on infinite VAR theory featuring a dominant unit to a large set of over 60 countries' real effective exchange rates, including those of the individual euro area economies, and compares impulse response functions to the estimated systems before and after EMU with respect to three types of shocks: a global US dollar shock, generalised impulse response function shocks and a global shock to risk aversion. Our results show that the way euro area countries' real effective exchange rates adjust to these shocks has converged indeed, albeit to a pattern that depends crucially on the nature of the shock. This result is noteworthy given the apparent divergence in competitiveness indicators of these countries in the first ten years of EMU, which suggests that this diverging pattern is unlikely to be due to global external shocks with asymmetric effects but rather to other factors, such as country-specific domestic shocks.
- JEL Code
- C21 : Mathematical and Quantitative Methods→Single Equation Models, Single Variables→Cross-Sectional Models, Spatial Models, Treatment Effect Models, Quantile Regressions
C23 : Mathematical and Quantitative Methods→Single Equation Models, Single Variables→Panel Data Models, Spatio-temporal Models
- 2 December 2008
- WORKING PAPER SERIES - No. 973Details
- Abstract
- This paper analyses the impact of the shift away from a US dollar focus of systemically important emerging market economies (EMEs) on configurations between the US dollar, the euro and the yen. Given the difficulty that fixed or managed US dollar exchange rate regimes remain pervasive and reserve compositions mostly kept secret, the identification strategy of the paper is to analyse the market impact on major currency pairs of official statements made by EME policy-makers about their exchange rate regime and reserve composition. Developing a novel database for 18 EMEs, we find that such statements not only have a statistically but also an economically significant impact on the euro, and to a lesser extent the yen against the US dollar. The findings suggest that communication hinting at a weakening of EMEs’ US dollar focus contributed substantially to the appreciation of the euro against the US dollar in recent years. Interestingly, EME policy-makers appear to have become more cautious in their communication more recently. Overall, the results underscore the growing systemic importance of EMEs for global exchange rate configurations.
- JEL Code
- E58 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Central Banks and Their Policies
F30 : International Economics→International Finance→General
F31 : International Economics→International Finance→Foreign Exchange
F36 : International Economics→International Finance→Financial Aspects of Economic Integration
G15 : Financial Economics→General Financial Markets→International Financial Markets
- 30 January 2008
- OCCASIONAL PAPER SERIES - No. 80Details
- Abstract
- This paper analyses the integration of China and India into the global economy. To this end, it presents estimates from a gravity model to gauge the overall degree of their trade intensity and the depth of their bilateral trade linkages, as well as selected measures of revealed comparative advantage and economic distance. The paper also reviews the key characteristics of the two countries' domestic economies that are relevant to their global integration and analyses their financial linkages with the rest of the world. Four main findings stand out. First, considering trade in goods, the overall degree of China's trade intensity is higher than fundamentals would suggest, whereas the converse is true for India. Second, Chinese goods exports seem to compete increasingly with those of mature economies, while Indian exports remain more low-tech. Third, China's exports of services tend to complement its exports of goods, while India's exports are growing only in deregulated sectors, such as IT-related services. Last, China's and India's roles in the global financial system are still relatively limited and often complementary to their roles in global trade.
- JEL Code
- E44 : Macroeconomics and Monetary Economics→Money and Interest Rates→Financial Markets and the Macroeconomy
F3 : International Economics→International Finance
C5 : Mathematical and Quantitative Methods→Econometric Modeling
- 31 August 2007
- WORKING PAPER SERIES - No. 801Details
- Abstract
- This paper tests for uncovered interest parity (UIP) at distant horizons for the US and its main trading partners, including both mature and emerging market economies, also exploring the existence of nonlinearities. At long and medium horizons, it finds support in favour of the standard, linear, specification of UIP for dollar rates vis-à-vis major floating currencies, but not vis-à-vis emerging market currencies. Moreover, the paper finds evidence that, not only yield differentials widen, but that US bond yields do react in anticipation of exchange rate movements, notably when these take place vis-à-vis major floating currencies. Last, the paper detects signs of nonlinearities in UIP at the mediumterm horizon for dollar rates vis-à-vis some of the major floating currencies, albeit surrounded by some uncertainty.
- JEL Code
- E43 : Macroeconomics and Monetary Economics→Money and Interest Rates→Interest Rates: Determination, Term Structure, and Effects
F31 : International Economics→International Finance→Foreign Exchange
F41 : International Economics→Macroeconomic Aspects of International Trade and Finance→Open Economy Macroeconomics
- 17 November 2006
- WORKING PAPER SERIES - No. 691Details
- Abstract
- This paper investigates the extent to which the slope of the yield curve in emerging economies predicts domestic inflation and growth. It also examines international financial linkages and how the US and the euro area yield curves help to predict. It finds that the domestic yield curve in emerging economies has in-sample information content even after controlling for inflation and growth persistence, at both short and long forecast horizons, and that it often improves out-of-sample forecasting performance. Differences across countries are seemingly linked to market liquidity. The paper further finds that the US and the euro area yield curves also have in- and out-of-sample information content for future inflation and growth in emerging economies. In particular, for emerging economies that have an exchange rate peg to the US dollar, the US yield curve is often found to be a better predictor than these economies’ own domestic curve and to causally explain their movements. This suggests that monetary policy changes and short-term interest rate pass-through are key drivers of international financial linkages through movements from the low end of the yield curve.
- JEL Code
- E44 : Macroeconomics and Monetary Economics→Money and Interest Rates→Financial Markets and the Macroeconomy
F3 : International Economics→International Finance
C5 : Mathematical and Quantitative Methods→Econometric Modeling
- 14 December 2005
- WORKING PAPER SERIES - No. 560Details
- Abstract
- This paper explains why domestic debt composition in emerging economies is risky. It carries out an analysis of the determinants of
- JEL Code
- F34 : International Economics→International Finance→International Lending and Debt Problems
F41 : International Economics→Macroeconomic Aspects of International Trade and Finance→Open Economy Macroeconomics
G15 : Financial Economics→General Financial Markets→International Financial Markets
- 30 July 2004
- OCCASIONAL PAPER SERIES - No. 18Details
- Abstract
- This paper analyses the main features of the market for euro-denominated bonds issued by non-euro area residents on the basis of a new database. It shows that large private corporations from mature economies have contributed significantly to the internationalisation of the euro since 1999, more than sovereigns in transition and emerging economies, whose part was initially expected to be stronger. It confirms that the euro
- 29 February 2004
- OCCASIONAL PAPER SERIES - No. 10The acceding countries’ strategies towards ERM II and the adoption of the euro: an analytical reviewDetails
- Abstract
- This paper reviews the strategies announced by the ten countries joining the European Union in May 2004 with regard to their intentions for participation in ERM II and the adoption of the euro. The paper examines the economic rationale of the monetary integration strategies declared by most acceding countries with a view to identifying also their potential risks. It does so by making use of several different approaches, including a short review of nominal convergence and a more extensive discussion from an optimum currency area perspective. An important part of the analysis is devoted to the implications of real convergence – i.e. catching-up growth in income and adjustment of the real economic structures towards those prevailing in the euro area – on the patterns of economic dynamics in acceding countries. Other aspects covered are the risks for external competitiveness in the convergence process and the appropriate pace of fiscal consolidation.
- 28 December 2002
- OCCASIONAL PAPER SERIES - No. 7Details
- Abstract
- This paper reviews the economic, monetary and financial relations between the EU and the euro area and a set of countries in a broad set of neighbouring regions. The 80 or so countries are mostly classified as transition, emerging or developing economies and belong to four main regions: the Western Balkans; the European part of the Commonwealth of Independent States; the Middle East and Northern Africa; and Sub-Saharan Africa. In many respects, these countries are diverse; however, some common features can also be identified. One of these common features is the fact that the euro area is their largest trading partner and the largest originator of international bank credit, foreign direct investment and official development assistance; meanwhile, from a euro area perspective, while these countries account for a somewhat smaller share of external trade, they are important as providers of energy, other raw materials and agricultural products.
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- Economic Policy
- 2018
- VoxEU column
- 2017
- IMF Working Paper
- 2017
- IMFBlog
- 2017
- Princeton University Press
- 2016
- VoxEU column
- 2016
- Journal of International Economics
- 2016
- VoxEU column
- 2016
- IMF Economic Review
- 2016
- Canadian Journal of Economics
- 2016
- Liberty Street Economics, Federal Reserve Bank of New York
- 2015
- Journal of Economic History
- 2014
- Economic Journal
- 2014
- Journal of Finance
- 2014
- VoxEU column
- 2014
- Journal of Development Economics
- 2014
- Journal of International Money and Finance
- 2014
- VoxEU column
- 2013
- VoxEU column
- 2013
- B.E. Journal of Macroeconomics
- 2012
- VoxEU column
- 2012
- VoxEU column
- 2011
- VoxEU column
- 2011
- VoxEU column
- 2011
- IMF Economic Review
- 2010
- Journal of International Money and Finance
- 2009
- Open Economies Review
- 2009
- Review of International Economics
- 2009
- Journal of Comparative Economics
- 2006
- Financial development, integration and stability – Evidence from Central, Eastern and South-Eastern Europe
- 2005
- EU accession – Financial sector opportunities and challenges for Southeast EuropeFinancial stability in Southeast Europe - Basel II and the challenges ahead
- 2004
- The development of the financial sector in Southeast Europe: innovative approaches in a volatile environmentThe financial sector and economic development: evidence from Southeast Europe
- 2000
- Japan and the World Economy