DOCSLIB.ORG

Ten Years from Now, What Will Be the Next Great Global Currency?”

Total Page：16

File Type：pdf, Size：1020Kb

Download full-text PDF Read full-text
Ten Years from Now, What Will Be the Next Great Global Currency?” Th€ Next Great Globa£ ¢urr€nc¥ TIE asked some of the THE MAGAZINE OF INTERNATIONAL ECONOMIC POLICY 888 16th Street, N.W., Suite 740 Washington, D.C. 20006 Phone: 202-861-0791 • Fax: 202-861-0790 world’s key experts: www.international-economy.com “Ten years from now, what will be the next great global currency?” 22 THE INTERNATIONAL ECONOMY SPRING 2008 The Dollar The U.S. dollar will continue to be the dominant international currency. The dollar EDWIN M. TRUMAN Senior Fellow, Peterson Institute for International Economics will reemerge. he U.S. dollar will continue to be the dominant interna- tional currency in ten years. It is still the only true inter- DAVID C. MULFORD Tnational currency; that is one that is used by parties that U.S. Ambassador to India and do not include U.S. residents. Do you see euro- denominated former Undersecretary for bonds issued in New York as dollar-denominated bonds are International Affairs, U.S. Treasury issued in London? Looking just at reserve holdings and con- sidering only developing countries as the most relevant hat goes around comes around. We have been group, it is true that since the first quarter of 1999, the dollar’s around this loop before. The dollar will reemerge as share has declined 10.6 percentage points in value terms, but Wthe U.S. economy restores its position in the world. in quantity terms the decline has been only 6.8 percentage points and the dollar’s decline was at a faster pace before the dollar’s peak in the first quarter of 2002 than since then. The dollar’s quantity share in the reserves of developing coun- tries is currently 38.5 percentage points ahead of the euro. At the recent pace of adjustment which has slowed since The dollar now, early 2002 during a period of substantial dollar depreciation, it would take the euro twenty-four years to catch the dollar in fifty years and in ten years it would still be more than 15 percentage points behind. the yuan. DINO KOS Managing Director and Head of Central Banks and Sovereign Wealth Funds, Morgan Stanley Asia Limited, and former Executive Vice President, Markets Group, Federal Reserve Bank of New York he U.S. dollar will remain the primary reserve currency ten years from now. Over a longer time horizon, say thirty or forty years, the next great currency—barring calamitous policy mis- Tsteps—will be the Chinese yuan. The longer period will be required to liberalize the Chinese economy, build up efficient money and capital markets, and foster the deep and liquid markets consistent with reserve currency status. SPRING 2008 THE INTERNATIONAL ECONOMY 23 The United States will come roaring back. The dollar and the JEFFREY E. GARTEN euro and the yuan. Juan Trippe Professor of International Trade and Finance, Yale School of Management KARL OTTO PÖHL Partner, Sal. Oppenheim Jr. & expect that after some setbacks the United States will come Cie., and former President, roaring back. All the talk about the growing economic power German Bundesbank Iof the European Union and China has some merit, but it is vastly overblown. The American economy will remain dom- inant, the U.S. capital markets the widest, deepest, and most innovative. ——————————————— ——————————————— Both the dollar and the euro. BARRY EICHENGREEN The dollar is currently Professor of Economics and Political Science, weak because of University of California, Berkeley nternational currency status is not a winner- major blunders take-all game. Only in exceptional periods like Ithe era of U.S. economic hegemony after World by the Fed. War II, when only the United States had deep and liquid financial markets open to the rest of the world, has a single currency dominated interna- tional transactions. To be sure, incumbency is an STEVE FORBES advantage—in politics and in the competition for President and CEO, Forbes Inc. global currency status alike. But ten years from now is not too soon to imagine a situation where he dollar will be the great global currency ten years from the dollar and the euro play roughly comparable now. It is currently weak because of major blunders by global roles. My choice, therefore, is both the dol- Tthe Federal Reserve, which has been printing too many lar and the euro, which are likely to cohabit greenbacks since 2004. That excessive money-making is why through the first half of the twenty-first century, all commodities have surged. In mid-2003 oil was selling at after which they may be challenged by the yuan. around $25 a barrel. Even with India, China, and central and eastern Europe booming and even with political turmoil in the ——————————————— Middle East, Venezuela, and Nigeria, there is no way the real price of oil and most other commodities should have almost quadrupled. The political fallout from rising inflation will The dollar and the euro. force the Fed and the next president to restabilize the belea- guered buck. PAUL DEROSA Then the dollar will again be king and all the talk of the Principal, Mt. Lucas Management Corp. need to diversify reserves into other currencies will fade away. In the meantime, though, the world will experience the unpleas- ant consequences, politically and economically, of the Fed’s mistakes. 24 THE INTERNATIONAL ECONOMY SPRING 2008 The dollar will remain The dollar will still first among equals. be the preeminent HENRY J. AARON Program Director, Economic Studies Program, global currency. Brookings Institution lthough other currencies will gain in importance, the dol- lar will remain first among equals because the U.S. econ- Aomy will remain the most flexible and most secure in the world. RICHARD N. COOPER Maurits C. Boas Professor of International Economics, ——————————————— Harvard University The dollar’s dominance will hile the euro will grow in relative importance, espe- cially in new members of the European Union and gradually diminish. Wnearby trading partners, the dollar will still be the pre- eminent global currency in both official and private hands a MICHAEL J. BOSKIN decade from now, reflecting not only institutional inertia but Professor of Economics and Hoover Institution Senior Fellow, also the strength of U.S. capital markets and the relative Stanford University decline of Europe in the world economy. en years from now, the U.S. dollar will still be the major ——————————————— global currency, although its dominance will continue to Tbe gradually diminished. The problems currently beset- The greenback. ting the United States financial system will have abated, although similar problems affecting other financial systems are PETER B. KENEN not yet fully transparent either. I expect U.S. growth to again Walker Professor of Economics and International Finance outpace Europe and Japan over the next decade, as the more Emeritus, Princeton University difficult demographic conditions in Western European coun- tries will combine with their high-tax welfare states to slow ——————————————— growth. Demography and minimal immigration will continue to slow Japan. However, the fraction of global commerce invoiced in other major currencies, especially the euro, will grow. Witness the Areva nuclear deal with the Chinese payable in euros. It is more likely than not that real oil prices and the U.S. current The dollar. account deficit as a share of GDP will decline. Nonetheless, the dollar will still be the most important international medium of exchange, and dollar-denominated assets will still be a rel- atively safe store of value, especially given political risk in much of the developing world and high taxes in Europe. But if the United States embarks down the path to a high-tax, bloated welfare state, the outlook for U.S. growth and the dollar will worsen. TADAO CHINO Senior Advisor, Nomura Research Institute, Ltd., and former President, Asian Development Bank SPRING 2008 THE INTERNATIONAL ECONOMY 25 The dollar now, the yuan in thirty. clearly the euro has already grown in importance, and it seems pretty inevitable that Chinese yuan usage is on the rise. So I MARC LELAND suspect the future will bring something between “some formal President, Marc E. Leland and Associates, and former or informal currency bloc” and “foreign exchange chaos.” As a Assistant Secretary for International Affairs, U.S. Treasury friend of the active investor, I sincerely hope the latter, or some- thing close to it. he dollar will have problems. The euro will play a more We are in an era of significant relative change. As I have important role but the dollar will still be the major world written for years, there is dramatic need for major reform of the Tcurrency—not the “great global currency” but greater International Monetary Fund, the World Bank, the G7 and the than any other. If you asked me to predict for thirty years from G8. If we get dramatic reform in the next ten years, then perhaps now, I might lean toward the yuan. a more stable foreign exchange environment might emerge, but without that relatively simple observable need to be fulfilled, ——————————————— why would anyone expect stability? The U.S. dollar. ——————————————— ANNE O. KRUEGER I expect the U.S. dollar to remain the Professor of International Economics, School of Advanced International Studies, Johns Hopkins University, dominant international currency. and former First Deputy Managing Director, International Monetary Fund JOHN WILLIAMSON Senior Fellow, Peterson Institute for he U.S. dollar is very likely to be the major currency ten International Economics years from now. While reserve holdings will probably be Tless concentrated in dollars than currently, the conve- expect the U.S. dollar to remain nience of using the dollar as the common denominator for the dominant international cur- transactions is important, and likely to mean that international Irency for a good bit longer than transactions will still be denominated predominantly in U.S.
Load more

Recommended publications
  • Is the International Role of the Dollar Changing?
    Is the International Role of the Dollar Changing? Linda S. Goldberg Recently the U.S. dollar’s preeminence as an international currency has been questioned. The emergence of the euro, changes www.newyorkfed.org/research/current_issues ✦ in the dollar’s value, and the fi nancial market crisis have, in the view of many commentators, posed a signifi cant challenge to the currency’s long-standing position in world markets. However, a study of the dollar across critical areas of international trade January 2010 ✦ and fi nance suggests that the dollar has retained its standing in key roles. While changes in the global status of the dollar are possible, factors such as inertia in currency use, the large size and relative stability of the U.S. economy, and the dollar pricing of oil and other commodities will help perpetuate the dollar’s role as the dominant medium for international transactions. Volume 16, Number 1 Volume y many measures, the U.S. dollar is the most important currency in the world. IN ECONOMICS AND FINANCE It plays a central role in international trade and fi nance as both a store of value Band a medium of exchange. Many countries have adopted an exchange rate regime that anchors the value of their home currency to that of the dollar. Dollar holdings fi gure prominently in offi cial foreign exchange (FX) reserves—the foreign currency deposits and bonds maintained by monetary authorities and governments. And in international trade, the dollar is widely used for invoicing and settling import and export transactions around the world.
    [Show full text]
  • Virtual Currency Schemes of 2012
    VIRTUAL CURRENCY SCHEMES OCTOBER 2012 VIRTUAL CURRENCY SCHEMES OctoBer 2012 In 2012 all ECB publications feature a motif taken from the €50 banknote. © European Central Bank, 2012 Address Kaiserstrasse 29 60311 Frankfurt am Main Germany Postal address Postfach 16 03 19 60066 Frankfurt am Main Germany Telephone +49 69 1344 0 Website http://www.ecb.europa.eu Fax +49 69 1344 6000 All rights reserved. Reproduction for educational and non-commercial purposes is permitted provided that the source is acknowledged. ISBN: 978-92-899-0862-7 (online) CONTENTS EXECUTIVE SUMMARY 5 1 INTRODUCTION 9 1.1 Preliminary remarks and motivation 9 1.2 A short historical review of money 9 1.3 Money in the virtual world 10 2 VIRTUAL CURRENCY SCHEMES 13 2.1 Definition and categorisation 13 2.2 Virtual currency schemes and electronic money 16 2.3 Payment arrangements in virtual currency schemes 17 2.4 Reasons for implementing virtual currency schemes 18 3 CASE STUDIES 21 3.1 The Bitcoin scheme 21 3.1.1 Basic features 21 3.1.2 Technical description of a Bitcoin transaction 23 3.1.3 Monetary aspects 24 3.1.4 Security incidents and negative press 25 3.2 The Second Life scheme 28 3.2.1 Basic features 28 3.2.2 Second Life economy 28 3.2.3 Monetary aspects 29 3.2.4 Issues with Second Life 30 4 THE RELEVANCE OF VIRTUAL CURRENCY SCHEMES FOR CENTRAL BANKS 33 4.1 Risks to price stability 33 4.2 Risks to financial stability 37 4.3 Risks to payment system stability 40 4.4 Lack of regulation 42 4.5 Reputational risk 45 5 CONCLUSION 47 ANNEX: REFERENCES AND FURTHER INFORMATION ON VIRTUAL CURRENCY SCHEMES 49 ECB Virtual currency schemes October 2012 3 EXECUTIVE SUMMARY Virtual communities have proliferated in recent years – a phenomenon triggered by technological developments and by the increased use of the internet.
    [Show full text]
  • The Pound Sterling
    ESSAYS IN INTERNATIONAL FINANCE No. 13, February 1952 THE POUND STERLING ROY F. HARROD INTERNATIONAL FINANCE SECTION DEPARTMENT OF ECONOMICS AND SOCIAL INSTITUTIONS PRINCETON UNIVERSITY Princeton, New Jersey The present essay is the thirteenth in the series ESSAYS IN INTERNATIONAL FINANCE published by the International Finance Section of the Department of Economics and Social Institutions in Princeton University. The author, R. F. Harrod, is joint editor of the ECONOMIC JOURNAL, Lecturer in economics at Christ Church, Oxford, Fellow of the British Academy, and• Member of the Council of the Royal Economic So- ciety. He served in the Prime Minister's Office dur- ing most of World War II and from 1947 to 1950 was a member of the United Nations Sub-Committee on Employment and Economic Stability. While the Section sponsors the essays in this series, it takes no further responsibility for the opinions therein expressed. The writer's are free to develop their topics as they will and their ideas may or may - • v not be shared by the editorial committee of the Sec- tion or the members of the Department. The Section welcomes the submission of manu- scripts for this series and will assume responsibility for a careful reading of them and for returning to the authors those found unacceptable for publication. GARDNER PATTERSON, Director International Finance Section THE POUND STERLING ROY F. HARROD Christ Church, Oxford I. PRESUPPOSITIONS OF EARLY POLICY S' TERLING was at its heyday before 1914. It was. something ' more than the British currency; it was universally accepted as the most satisfactory medium for international transactions and might be regarded as a world currency, even indeed as the world cur- rency: Its special position waS,no doubt connected with the widespread ramifications of Britain's foreign trade and investment.
    [Show full text]
  • Presentation-From-Roundatable-4-Out
    Central Europe & eurozone Saturday, 6 October 2018 Grand Hotel Kempinski High Tatras dr. Kinga Brudzinska [email protected] Overlapping Europes *Kosovo and Montenegro use Euro but are not part of the EU European Commission, “White Paper on the Future of Europe: Reflections and scenarios for the EU27 by 2025”, 2017 Short history of the euro ⊲ The Delors report (1989), proposed to articulate the realisation of Economic and Monetary Union (EMU) in different stages, which ultimately led to the creation of the single currency: the euro. ⊲ The Maastricht Treaty (1992), signed by twelve member countries of the, at the time called, European Community, now the EU. Among the many topics discussed, the European Council decided to create an Economic and Monetary Union. It entered into force on 1 November 1993. ⊲ Euro entered into force for the first time on 1 January 1999 in eleven of the, at the time, fifteen Member States of the Union, but only for non-physical forms of payment. The old currencies co-existed with the new currency until 28 February 2002, the date on which they ceased their legal tender and could not be accepted for payments. ⊲ The Lisbon Treaty (2009) The observance of the parameters established in the various European Treaties, is then merged into this treaty to try to get out of the crisis (Lehman Bank, 2008) and prevent it from being repeated in the future. ⊲ On 9 May 2010 the Council of the European Union agreed on the creation of the European Financial Stability Fund (EFSF) (to provide aid to debt-laiden Eurozone countries) and the European Financial Stabilisation Mechanism (EFSM).
    [Show full text]
  • Chapter 2 International Monetary System Answers & Solutions to End-Of-Chapter Questions and Problems
    CHAPTER 2 INTERNATIONAL MONETARY SYSTEM ANSWERS & SOLUTIONS TO END-OF-CHAPTER QUESTIONS AND PROBLEMS QUESTIONS 1. Explain Gresham’s Law. Answer: Gresham’s law refers to the phenomenon that bad (abundant) money drives good (scarce) money out of circulation. This kind of phenomenon was often observed under the bimetallic standard under which both gold and silver were used as means of payments, with the exchange rate between the two fixed. 2. Explain the mechanism which restores the balance of payments equilibrium when it is disturbed under the gold standard. Answer: The adjustment mechanism under the gold standard is referred to as the price-specie- flow mechanism expounded by David Hume. Under the gold standard, a balance of payment disequilibrium will be corrected by a counter-flow of gold. Suppose that the U.S. imports more from the U.K. than it exports to the latter. Under the classical gold standard, gold, which is the only means of international payments, will flow from the U.S. to the U.K. As a result, the U.S. (U.K.) will experience a decrease (increase) in money supply. This means that the price level will tend to fall in the U.S. and rise in the U.K. Consequently, the U.S. products become more competitive in the export market, while U.K. products become less competitive. This change will improve U.S. balance of payments and at the same time hurt the U.K. balance of payments, eventually eliminating the initial BOP disequilibrium. 3. Suppose that the pound is pegged to gold at 6 pounds per ounce, whereas the franc is pegged to gold at 12 francs per ounce.
    [Show full text]
  • Bloomberg Functions
    www.survivrelondres.co.uk Mnemonic Function Description Mnemonic Function Description ALLQ Bid & Offer Quotes HMSM Four-in-One Graph Menu ANR Analyst Recommendations HP Historic Price AREA Telephone Codes HRH Historic Return Histogram (sigma(stnd dev) for an index) ASW Asset Swap Calculator HS Historic Spread AZS Altman's Z-score Model IBQ Bloomberg Industry Analysis BBAM LIBOR FIXING IC International Clock BBEA Earnings Analysis ICN Important Company News BBSA Equity Analyst Survey IECO Economic Stats (Global Comparison) BBTE Bloomberg Bond Trader Europe IMEN Equity Indices of the World BBTG U.S. Treasury Actives IRSB Interest Rate Swap Rates BBXL Bloomberg Data & Calculations in Excel IRSM Interest Rate Swaps & Derivatives Functions Menu BETA Beta ISSD Issuer Information BLP Bloomberg Launchpad IYC International Yield Curves BQ Bloomberg Quote KAOS Hurst Exponent Graph BR Bloomberg Research LEAG Underwriter League and Volume Tables (Bonds, Equity) BRC Broker Research Reports by Company LMAL Loan Market Association BRDY Brady Bonds LR LIBOR Rates BRX Broker Research LSRC Loan Search BTMM Money Mkts &Treasuries by country MA M&A BU Bloomberg University MAIN Main Functions Menu (by Mkt sector, others) BWS Bloomberg Weather Service MANU Online Manuals CACS Corporate Action Calendar (Splits, Dividends, etc.) MB Metals & Ore Prices and Analysis CBMU Convertible Menu MCCL McClellan Oscillator CBQ Country Quotes MEMB Index Members CBRT Central Bank Monetary Policy Rates MGMT Management CDR Calendar of National Holidays (all countries) MGU Message
    [Show full text]
  • The US Dollar- Scenario of a World Currency
    A Service of Leibniz-Informationszentrum econstor Wirtschaft Leibniz Information Centre Make Your Publications Visible. zbw for Economics Büschgen, Hans E. Article — Digitized Version The US dollar- scenario of a world currency Intereconomics Suggested Citation: Büschgen, Hans E. (1987) : The US dollar- scenario of a world currency, Intereconomics, ISSN 0020-5346, Verlag Weltarchiv, Hamburg, Vol. 22, Iss. 2, pp. 59-68, http://dx.doi.org/10.1007/BF02932274 This Version is available at: http://hdl.handle.net/10419/140066 Standard-Nutzungsbedingungen: Terms of use: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Documents in EconStor may be saved and copied for your Zwecken und zum Privatgebrauch gespeichert und kopiert werden. personal and scholarly purposes. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle You are not to copy documents for public or commercial Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich purposes, to exhibit the documents publicly, to make them machen, vertreiben oder anderweitig nutzen. publicly available on the internet, or to distribute or otherwise use the documents in public. Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, If the documents have been made available under an Open gelten abweichend von diesen Nutzungsbedingungen die in der dort Content Licence (especially Creative Commons Licences), you genannten Lizenz gewährten Nutzungsrechte. may exercise further usage rights as specified
    [Show full text]
  • Three Essays on European Union Advances Toward a Single Currency and Its Implications for Business and Investors Charlotte Anne Bond Old Dominion University
    Old Dominion University ODU Digital Commons Theses and Dissertations in Business College of Business (Strome) Administration Winter 1998 Three Essays on European Union Advances Toward a Single Currency and Its Implications for Business and Investors Charlotte Anne Bond Old Dominion University Follow this and additional works at: https://digitalcommons.odu.edu/businessadministration_etds Part of the Finance and Financial Management Commons, International Business Commons, and the International Relations Commons Recommended Citation Bond, Charlotte A.. "Three Essays on European Union Advances Toward a Single Currency and Its Implications for Business and Investors" (1998). Doctor of Philosophy (PhD), dissertation, , Old Dominion University, DOI: 10.25777/mc19-6f14 https://digitalcommons.odu.edu/businessadministration_etds/77 This Dissertation is brought to you for free and open access by the College of Business (Strome) at ODU Digital Commons. It has been accepted for inclusion in Theses and Dissertations in Business Administration by an authorized administrator of ODU Digital Commons. For more information, please contact [email protected]. Three Essays on European Union Advances Toward A Single Currency and its Implications for Business and Investors by Charlotte Anne Bond A dissertation submitted to the Faculty of Old Dominion University in partial fulfillment of the requirements for the degree of Doctor o f Philosophy (Finance) Old Dominion University College of Business Norfolk, Virginia (December 1998) Approved by: Mohammad Najand (Committee Chair) \ tee Member) Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. UMI Number: 9921767 Copyright 1999 by Bond, Charlotte Anne All rights reserved. UMI Microform 9921767 Copyright 1999, by UMI Company. All rights reserved. This microform edition is protected against unauthorized copying under Title 17, United States Code.
    [Show full text]
  • Philadelphia Stock Exchange World Currency Options Trading
    Philadelphia Stock Exchange World Currency Options Trading Currency Option Fundamentals Currency Market Analysis Currency Option Trading Al Brinkman, Director, Derivatives Marketing, Philadelphia Stock Exchange Jack Crooks, President, Blackswan Capital & Editor, World Currency Options Alert Newsletter The Underlying Currency Market Like many other investments, Foreign Exchange trading carries a high level of risk and may not be suitable for all investors Foreign Exchange trading requires constant monitoring and an understanding of the relationships between currencies, as well as what factors influence the currencies value. You will need to understand fully the market and some of its unique features. Any strategies discussed, including examples using actual securities and or price data, are strictly for illustrative and educational purposes only and are not to be construed as an endorsement, recommendation, or solicitation to buy or sell Trading Currency Options Options involve risks and are not suitable for everyone. Prior to buying or selling options, an investor must receive a copy of Characteristics and Risks of Standardized Options. Copies may be obtained by contacting your broker or The Options Industry Council at One North Wacker Drive, Chicago, IL 60606. In order to simplify the computations, commissions, fees, margin interest and taxes have not been included in the examples used in these materials. These costs will impact the outcome of all stock and options transactions and must be considered prior to entering into any transactions. Investors should consult their tax advisor about any potential tax consequences. Any strategies discussed, including examples using actual currencies/securities and price data, are strictly for illustrative and educational purposes only and are not to be construed as an endorsement, recommendation, or solicitation to buy or sell securities.
    [Show full text]
  • The Road to the Euro
    One currency for one Europe The road to the euro Ecomomic and Financial Aff airs One currency for one Europe The road to the euro One currency for one Europe The road to the euro CONTENTS: What is economic and monetary union? ....................................................................... 1 The path to economic and monetary union: 1957 to 1999 ............... 2 The euro is launched: 1999 to 2002 ........................................................................................ 8 Managing economic and monetary union .................................................................. 9 Looking forward to euro area enlargement ............................................................ 11 Achievements so far ................................................................................................................................... 13 The euro in numbers ................................................................................................................................ 17 The euro in pictures .................................................................................................................................... 18 Glossary ........................................................................................................................................................................ 20 2 Idreamstock © One currency for one Europe The road to the euro What is economic and monetary union? Generally, economic and monetary union (EMU) is part of the process of economic integration. Independent
    [Show full text]
  • European Markets Will Focus On: the G-20 Meeting Summit Held in European Stock Commentary P
    A Eurex publication focused on European financial markets, produced by Commodity Research Bureau E u r o p e a n M a r k e t Outlook Preview for the week of November 17, 2008 CONTENT This week, European markets will focus on: The G-20 meeting summit held in European Stock Commentary p. 2 • reaction to the outcome of the two- Washington D.C. over the past week- day Group of 20 (G-20) summit in end did not produce any major surprises. European Interest Rates p. 2 Washington D.C. over the weekend, Nevertheless, it was encouraging that the • the interbank lending situation which leaders of countries representing 90% of Economic Trading Calendar p. 3 continues to improve with the 3-month world GDP sat down together to focus on Euribor rate dropping to a 16-month the world's economic problems. That may Eurex Closing Prices p. 5 low, although interbank lending is still raise the priority level for trying to solve far from normal, intractable problems such as global financial • the increased chance for another 50 bp regulation, harmonized global accounting rate cut by the European Central Bank standards, free trade, currency issues, and (ECB) at its next meeting on December more appropriate support for developing the second half of 2009 from what is likely 4 after last week's Q3 GDP reports put countries from agencies such as the IMF to be a rough first half. both Germany and the Euro-Zone into and the World Bank. the technical definition of a recession, The ECB is scrambling to prop up the • the European equity markets which fell As expected, Q3 Euro-Zone GDP con- Euro-Zone economy.
    [Show full text]
  • Constructing Historical Euro Area Data∗
    View metadata, citation and similar papers at core.ac.uk brought to you by CORE provided by Research Papers in Economics Constructing Historical Euro Area Data∗ Heather Anderson∗, Mardi Dungey+, Denise Osborn# and Farshid Vahid∗ ∗ Australian National University and CAMA +CERF, University of Cambridge and CAMA #University of Manchester and CAMA April 2006 Abstract The conduct of time series analysis on the Euro Area currently presents problems in terms of availability of sufficiently long data sets. The ECB has provided a dataset of quarterly data from 1970 cover- ing many data series in its Area Wide Model (AWM), but not for a number of important financial market series. This paper discusses methods for producing such backdata and in the resulting difficulties in selecting aggregation methods. Simple applicaiton of the AWM weights results in orders of magnitude difference in financial series. The use of different aggregation methods across series induces rela- tionships. The effects of different possible methods of constructing data are shown through estimation of simple Taylor rules, which re- sult in different weights on output gaps and inflation deviation for what are purportedly the same data. Keywords: Euro area, data aggregation, Taylor rule JEL classification: C82, C43, E58 ∗Author contact details: Anderson: [email protected]; Dungey: [email protected]; Osborn: [email protected]; Vahid: [email protected]. This research is supported by ARC Linkage Grant LX0561266. 1 1 Introduction Time series analysis of macroeconomic behaviour for the Euro Area requires some serious attention to historical data. The common Euro currency has ex- isted only since the beginning of 1999, but the period since then clearly does not provide sufficient observations to enable most types of macroeconomic analyses to be undertaken for the Euro Area.
    [Show full text]