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Both papers in this session try to discriminate between various theories of the determination of exchange rates. The null hypothesis of the Brittain paper is that monetary factors are not relevant in the determination of exchange rates. After examining some of the implications of current monetary models he rejects the null hypothesis. The Sargen paper sets out to explain the empirical observation that in the floating exchange rate period some rates were highly volatile while others seemed to be quite stable. He examines the implications of two alternative theories. He finds that the Purchasing Power Parity (PPP) theory as extended by Girton & Roper is not quite adequate in explaining exchange rate fluctuations, but that it explains reserve changes quite well. The Aliber-Dornbusch-McKinnon approach, which is the alternative theory, implies that structural parameters of the economy will influence exchange rate volatility. He then proceeds to estimate these parameters and finds that they are not sufficiently different across countries to account for the differences in exchange rate volatility. [ABSTRACT FROM AUTHOR]

This paper provides an analytical overview of the most widely used capital flow datasets. The paper is written as a guide for academics who embark on empirical research projects and for policymakers who need timely information on capital flow developments to inform their decisions. We address common misconceptions about capital flow data and discuss differences between high‐frequency proxies for portfolio flows. In a nowcasting "horse race" we show that high‐frequency proxies have significant predictive content for portfolio flows from the balance of payments (BoP). We also construct a new dataset for academic use, consisting of monthly portfolio flows broadly consistent with BoP data. [ABSTRACT FROM AUTHOR]

Current account deficit poses a serious threat for a country's macroeconomic stability despite the fast economic growth. The primary objective of this paper is to explain and critically examine the determinants of current account deficit across seven South Asian countries using yearly data for 1980–2016 period. This paper employed several econometric techniques such as cross‐sectional dependence to see if shocks that occur in one country affect another, panel unit root test to check the stationary of the data and Panel cointegration test to check long‐run relationship among the variables. This study also implemented Continuously Updated estimation procedure given to estimate long‐run coefficients. The findings suggest that an appreciation of real effective exchange rate leads to a reduction in current account deficit, contrary to popular belief. The analysis also reveals that financial development, trade openness, fiscal balance and population growth have positive and significant relationship with current account deficit in South Asia but net foreign asset negatively affects current account deficit. This study, therefore, has several policy implications for South Asian countries. [ABSTRACT FROM AUTHOR]

These two papers apply the monetary approach to the balance of payments to explain: (1) the relationship between daily changes in forward and spot exchange rates, and exchange rates and interest differentials; and (2) the relationship between exchange rate movements and/or reserve movements and monetary developments over quarterly time periods. Both papers are based on traditional assumptions of the monetarist approach but find that non-monetary factors are also needed to explain countries' exchange rate and reserve movements. It might be useful to consider the validity of some of the basic assumptions when applied to individual industrial countries. [ABSTRACT FROM AUTHOR]

This paper's finding's will be usef ul for both practitioners and academics grappling with the difficulty of defining 'equity' and 'liabilities'. In addition, the research makes a valuable contribution by addressing the need for interpretive‐inspired financial reporting research. This paper explores the distinction between 'equity' and 'liabilities' in financial reporting to assess the merits of the current system of accounting for share‐based payment transactions. It applies an interpretive methodology. Data were collected from a series of interviews with purposefully selected experts. Criticisms of, and support for, the current accounting regime are interpretively analysed and used to identify key themes or principles for evaluating the merits of three models proposed in the academic literature: the strict liability, narrow equity, and ownership‐settlement models. The study finds that the strict liability approach remains supported on the grounds that it provides decision‐useful information with which users are familiar. The other models are rejected as they are perceived as diminishing the usefulness of financial reporting. The study also identifies support for an obligation‐centric approach, not fully developed in the literature, which may require detailed consideration by standard‐setters. This paper explores the equity vs liabilities debate in the context of share based payment transactions. The paper finds that decision usefulness is more critical than strict adherence with conceptual requirements. [ABSTRACT FROM AUTHOR]

Central Bank operational frameworks can be challenged during times of severe financial stress. Typical of such an instance is where policymakers attempt to heavily manage or fix a domestic exchange rate whilst faced with balance of payments pressures. However, it is claimed to be impossible for policymakers to achieve both monetary independence and exchange rate stability if the domestic economy were to post a balance of payment surplus, otherwise known as the 'impossible trinity'. The purpose of this paper is to investigate the European Monetary System crisis through the lens of Institutional Practice, that is the day‐to‐day operations of key institutions, such as the Central Bank, Treasury and commercial banks, with a view to demonstrate why global imbalances are able to occur and persist across the international monetary system. Through both a theoretical and an empirical appraisal, this paper shows how Central Banks in economies with a balance of payments surplus can circumvent the binding constraints of the trinity within their operational frameworks. [ABSTRACT FROM AUTHOR]

The common theme running through the three papers prepared for this session is the nature and effectiveness of the international balance-of-payments adjustment process. Klein projects the effect of exchange-rate changes on national balance-of-payments positions. Kenen assumes fixed exchange rates and simulates the effects on the U.S. balance of payments of changes in U.S. monetary and fiscal policy. Adler and Stevens analyze the relationship between foreign direct investment by U.S. firms and U.S. exports, and then use their model to simulate the effect of several kinds of policy measures (exchange-rate, tariff and tax-rate changes) on that key aspect of the adjustment process. [ABSTRACT FROM AUTHOR]

The literature on determinants of cross-border capital flows has consistently assumed the determinants of such flows to be constant throughout the sample. This paper investigates this notion by estimating the time varying relationship between portfolio flows to South Africa and two widely accepted determinants of such flows: the sovereign spread and global risk (measured by the CBOE Volatility Index, henceforth VIX). The results show that the time variation is highly significant and a constant parameter model will give biased estimates of the effects of risk on capital flows. The paper also gives important insights to South African policy makers and financial practitioners: Bond flows (non-resident purchases of South African bonds) have become more sensitive to the VIX after 2010. Share flows were particularly sensitive at the peak of the 2008 global financial crisis, but have at other times not responded in a statistically significant manner to changes in global risk. The relationships are estimated using a time varying parameter vector autoregressive (TVP VAR) model with stochastic volatility. [ABSTRACT FROM AUTHOR]

Although double‐entry accounting has been used for more than 600 years, today's era of disruptive technological change utilising blockchain and FinTech has led to the emergence of another promising accounting method: triple‐entry accounting. This paper explores triple‐entry accounting, from its conception to the current state of play, using three case studies. We find that: (i) in a blockchain ecosystem, for some accounts, business entities will only need to perform a single entry internally and the opposite entry will be recorded in a public shared ledger; and (ii) triple‐entry accounting is a new and a more efficient way to address fundamental trust and transparency issues that plague current accounting systems. Triple‐entry accounting with blockchain, when properly implemented, can fundamentally improve accounting. [ABSTRACT FROM AUTHOR]

Single phase‐earth faults are the most frequent faults likely to occur but hard to identify in distribution system, especially in a neutral un‐effectively grounded system. To address this issue, this paper innovatively proposes a typical distribution system structure, in which it only introduces one three‐phase isolated power transformer (PT)‐based subnetwork division mode that can effectively limit the zero‐sequence current flow from other sound lines. Second, following the qualitative discussions about the effect of the proposed structures on power supply reliability and probability of bushfires caused by high impedance earth faults (HIEFs), a novel detecting judgement criterion merely using vector‐based variation via pre‐fault and post‐fault zero‐sequence voltage is mathematically formulated. In general, the proposed structure takes into account the the fault current suppression while manifesting fault feature at the same time, and in contrast with current detecting methods, vectorized form can present a wider exploring space and a higher identifying sensitivity, especially in detecting HIEFs. Numerical simulations and field tests validate the effectiveness and adaptability of the proposed detecting approach towards single phase‐earth fault identification field. [ABSTRACT FROM AUTHOR]

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The growth in global current account imbalances has produced a lopsided global economy, characterised by large lenders and large borrowers, large savers and large consumers, and large exporters and large importers. For many years, the G20 has committed to reducing these imbalances. But has it been successful? Are the G20's policy prescriptions for reducing these imbalances the right ones? And have countries altered their policies because of the discussions and commitments in the G20 or not? The paper assesses whether the G20 has achieved its goal of reducing global current account imbalances. It then uses the G‐Cubed (G20) model — a multi‐country, multi‐sector, intertemporal general equilibrium model — to assess the impacts of the G20's proposed policy agenda. It shows that the G20's policy prescriptions — reducing the fiscal deficit in the United States, increasing public infrastructure investment in Germany and increasing domestic consumption in China — are not necessarily effective in reducing current account imbalances and, when imbalances are reduced, it often comes at the cost of the real economy. Finally, the paper uses the results from in‐depth interviews with 61 policymakers from across all G20 countries — including Janet Yellen, Kevin Rudd, Ben Bernanke, Haruhiko Kuroda, Jack Lew, Mark Carney and 55 others — to explore whether the G20's focus on current account imbalances influences domestic policies. It finds that, while the G20's influence has been marginal, there are ways in which it could be strengthened. The paper concludes with a discussion on how the G20's agenda could be reformed to help reduce current account imbalances in the future. [ABSTRACT FROM AUTHOR]

The paper investigates the twin deficit hypothesis in case of India. Furthermore, this paper examines the Ricardian equivalence hypothesis and the Feldstein‐Horioka puzzle to complement the twin deficit hypothesis. To substantiate objectives, annual time series data for the period 1970 to 2012 have been used. Time series econometrics techniques such as vector autoregressive model and auto regressive distributive lag model have been employed wherever necessary. The empirical findings suggest the rejection of twin deficit hypothesis and Feldstein‐Horioka puzzle. However, it validates the Ricardian equivalence hypothesis i.e the fiscal deficit does not affect the current account deficit. Fiscal deficit retaining strategy may not be all in controlling current account deficit, than taking wholesome strategy that includes export promotion. [ABSTRACT FROM AUTHOR]

An introduction is presented which discusses various reports within the issue on topics including the balance of payments in Ireland, failure of the banking regulation in the country, and the differences in the behavior between domestic and multinational companies.

The variance bounds on exchange rate movements implied by the monetary approach to exchange rate in an efficient foreign exchange market is shown to be violated by sample data. The paper also presents evidence showing that the forecast errors implied by the monetary model can be forecasted using historical data. The results are interpreted to suggest either the incompatibility of the monetary approach with sample data, or an inefficient foreign exchange market or both. [ABSTRACT FROM AUTHOR]

The article discusses international capital movements during the postwar period in a context of broad trends in world payments. Data on balance of payments statistics was collected by the International Monetary Fund in addition to the data available by official grants and capital movements for this research. However, there is a lack of data on private capital and short term capital as it is not consistent from country to country and so contributes to some errors in research. Also, the quantitative statements provided are merely indications of orders of magnitude rather than specific estimates due to the lack of data.

This paper examines the sustainability of the current account deficit (CAD) and validity of the intertemporal budget constraint of India for the period of 1980 to 2019. The cointegration results show that exports and imports are not cointegrated and the current account (CA) series is not mean reverting during the study period. Therefore, the results refute the sustainability of CAD and the validity of the intertemporal budget constraint in the Indian context. Furthermore, the study also emphasised the testing of the disaggregated CA and found that while the goods account is not sustainable, the services account found to be sustainable in the long run. Our findings thus indicate the potential for aggregation bias to have an impact on the overall CA sustainability results. Therefore, policies that help in achieving self‐sufficiency on the one hand and export promotion in goods on the other may eventually contribute to CA sustainability. [ABSTRACT FROM AUTHOR]

Information about several papers discussed at the conference "Economic Development of European Socialist Countries," which was held in Plovdiv, Bulgaria on November 30 to December 6, 1964 is presented. The various reports presented focused on the comprehension of the economic trends and problems in Eastern Europe. Such features and issues considered including balance of payments, labor skills, and technological innovations.

This paper presents a new perspective on the study of credit booms by both examining what determines their duration and testing for relevant political features. The results from the estimation of a discrete‐time duration model show that both the economic and the political environment influence the duration of credit booms. These events are found to last longer when: (a) the economy is growing faster; (b) levels of liquidity in the banking system are lower; (c) current account position deteriorates; (d) centre parties are in office; and (e) with coalitions/minority governments. Evidence of a political cycle in the duration of credit booms is also detected. Additionally, this study shows that credit booms that end up in banking crises last longer but this effect can be offset by a higher degree of Central Bank independence. Hence, a monetary authority that is not influenced by political pressures is essential to prevent the unfolding of credit booms into banking crises. [ABSTRACT FROM AUTHOR]

This paper derives and estimates a current account model based on the absorption approach (which views the current account balance as the difference between domestic saving and investment). This approach provides a framework which allows drivers of cross-border financial flows and other determinants of saving and investment to be included in a current account model, an advantage not offered by the elasticity approach (which views the current account balance as the sum of net exports, net investment income, and net unilateral transfer). We estimate and compare vector error-correction models of the absorption and elasticity approaches, with the absorption model nesting the elasticity model. We find that (1) the restrictions imposed by the elasticity model are rejected; and (2) the mean-squared prediction errors of the absorption model are significantly smaller than those of the elasticity model. [ABSTRACT FROM AUTHOR]

This paper investigates expert revisions of potential output (PO) estimates following recessions. Using data from the Organisation for Economic Co‐operation and Development (OECD), we show that downward revisions are substantial, permanent, and mostly driven by supply shocks. In contrast, PO estimates do not significantly react to demand shocks. Revisions are also partly caused by mismeasurement of PO before recessions. In particular, we show that the length of the preceding boom and pre‐recession values of the current account balance and credit volumes are correlated with post‐recession PO revisions. Our results call for improved methods for estimating PO and provide evidence against the existence of substantial hysteresis following demand shocks. [ABSTRACT FROM AUTHOR]

Abstract: The contribution of this paper is threefold. First, it proposes general specifications for export and import functions that encompass the contributions of both Kaldorian and Schumpeterian literatures on the determinants of trade performance. Second, the paper provides evidence of the impact of nonprice competitiveness, measured by the growth of relative economic efficiency on export and import growth in different technological sectors. Third, it shows that the magnitude of income elasticities of demand is partially determined by relative economic efficiency. [ABSTRACT FROM AUTHOR]

From 2002 to 2011, China ran large surpluses in both the current and capital accounts of its balance of payments, which the People's Bank of China (PBOC) purchased and held at official foreign reserves to avoid nominal appreciation of the currency. Concurrently, with its massive purchases of foreign exchange, the PBOC compelled commercial banks to buy PBOC ‘sterilisation bonds’ and raised commercial bank reserve requirement ratios to avoid monetisation of its foreign exchange purchases and concomitant upward pressure on the price level (that is, real appreciation of the currency). Sterilising foreign exchange intervention, as China did for a decade, constitutes a violation of the implicit rules of a fixed exchange rate regime and as such can be seen as a mercantilist policy of manipulating the real exchange rate to gain, or avoid losing, international price competitiveness—what Corden (1981) termed ‘exchange rate protection’. This paper sets out the simple theory of the costs and benefits of exchange rate protection and provides back‐of‐the‐envelope estimates of their magnitude in China in the 2000s. It also explores the ‘other side of the story’, the decline in US manufacturing employment in the 2000s, which recent literature attributes to a ‘China Trade Shock’ that allegedly resulted from the US granting Permanent Normal Trade Relations (PNTR) to China in 2001. Here, it is argued that the so‐called China Trade Shock resulted from China's sterilised intervention policy, not the granting of PNTR. The implications of these competing hypotheses are considered in the conclusions. [ABSTRACT FROM AUTHOR]

There has been a significant rise in the empirical work distinguishing between episodes of sharp slowdowns and surges in capital inflows. Much of this analysis has centred on gaining a better understanding of the cyclical behaviour of capital flows. This paper continues in this vein by identifying capital flow episodes for South Africa and analyses the nature and main drivers of cross-border flows during these episodes. This paper makes two major contributions to the empirical work on South African capital flows. First, specific attention is given to some pertinent measurement issues in the identification of capital flow episodes for South Africa. The post capital account liberalisation period (post-1995-period) is delineated into a 'normal' period (when capital inflows were close to historical averages) and an 'abnormal' period (when capital inflows deviated significantly from the historical average). Second, the paper identifies some defining characteristics during these two periods. In this regard, the behaviour of domestic and foreign agents as drivers of capital flows and the probability of capital flow reversals across asset classes are given particular attention. Although these issues have significant policy implications, they have, to date, been given limited attention in the empirical work on South African capital flows. [ABSTRACT FROM AUTHOR]

Drawing on a panel of advanced economies, this paper documents a concave and non‐monotonic link between inequality and the aggregate household saving rate. We find that, at a low level of inequality, more inequality is associated with higher saving; but we also show that a negative relationship between inequality and saving prevails where inequality is high. Using different empirical approaches, we locate the turning point, where the marginal effect of inequality turns from positive to negative, at a net income Gini coefficient of around 30. Moreover, we show that the relationship between inequality and saving also depends on financial market conditions. While inequality increases saving, when credit is scarce it tends to reduce saving at high levels of credit. This paper primarily focuses on household saving, yet we also find some evidence for a non‐monotonic effect of inequality on private saving, national saving, and the current account balance. [ABSTRACT FROM AUTHOR]

This paper uses a blended methodology—conventional tests of 'Thirlwall's law' combined with an in‐depth growth narrative approach and unit root tests—to identify the dominant balance‐of‐payments adjustment mechanism in the Zambian economy over the period 1956–2017. Consistent with Thirlwall's growth law, the main results identify income changes as the dominant balance‐of‐payments adjustment mechanism, rather than relative price changes. The three‐regime export demand function further reflects the vulnerability of the Zambian economy to unexpected busts in the world copper market, and highlights the need for effective industrial policies to create a more diversified economy into higher value‐added manufactures. The analysis also demonstrates that the results are robust to some of the main criticisms that have been levelled against Thirlwall's original growth law. [ABSTRACT FROM AUTHOR]

This paper generalizes the Sethi–Thompson model of cash balance dynamics to the case of multiple current and investment accounts, with the cash flows or demands incident on the current accounts. Cash transfers can occur between any pair of current–current or current–investment accounts, with transaction costs proportional to the amount transferred, always deducted from current accounts. Performance indices are defined and maximization of an index for the next instant (day), by suitable choice of cash transfers that satisfy desired constraints on account balances, defines the basic optimal control problem referred to as one step ahead optimal control. It is shown that this one step ahead optimal control can be written as a mixed integer linear program of small size, leading to an implementable real time strategy for the generalized cash balance problem. In addition, for the simple case of a single cash and investment account, the proposed strategy is derived analytically and compared with a strategy of Miller–Orr type, called a three‐level strategy. Omniscient optimal control over a horizon is defined as the globally optimal control strategy, assuming the demands over the entire horizon to be known: although computable a posteriori, it is not implementable a priori, and only serves as a benchmark for comparison. The proposed one step ahead optimal or myopic approach makes no assumptions about the distribution of cash demands, and examples show that it attains performance indices which are superior to those attained by three‐level control strategies, and compare favorably with the omniscient benchmark performance indices. [ABSTRACT FROM AUTHOR]

Abilities, in contrast to mere dispositions, propensities, or tendencies, abilities seem to be features of agents that put the agent herself in control. But what is the distinguishing feature of abilities vis‐à‐vis other kinds of powers? Our aim in this paper is to point, in answer to this question, to a crucial feature of abilities that existing accounts have tended to neglect: their adaptivity. Adaptivity is a feature of how abilities are exercised. The main reason for its relative neglect has been that most extant accounts have focused solely on whether abilities are exercised successfully in certain possible situations and have mostly understood the exercise of an ability in terms of complete successful performance. We begin by pointing out two aspects of abilities with regard to which current accounts seem (at best) incomplete: control and exercise. We then introduce adaptivity as we understand it, and end by putting it to work in developing a fuller understanding of abilities that does better than current accounts. [ABSTRACT FROM AUTHOR]

The monetary theory of the balance of payments (MTBOP) has two obvious virtues. It is simple and it is based on assumptions that economists of nearly every persuasion would accept, namely that there exists a stable demand function for real money balances and that purchasing power parity holds in the long run. One question regarding the theory remains unanswered, how well does it explain actual balance of payments and exchange rate behavior over the short and long run? If, as theorists such as Dornbusch (1976) and Kouri (1976) suspect, the theory is only applicable in the long run, how must it be amended to explain short-run fluctuations? The Sargen and Brittain papers attempt to shed empirical light on this problem. [ABSTRACT FROM AUTHOR]

This paper addresses the issue of household debt in the Danish economy. We develop a large‐scale stock‐flow consistent model. The model has five main sectors namely, household, firms, financial corporations, government, and the rest of the world sectors. We use the model to explore the macroeconomic stability of the Danish economy, given the recent level of household debt. We fit the model to annual data from 1998 to 2016, estimate the structural parameters, and simulate the model for a baseline scenario, against which we compare and contrast the effects of different economic shocks. To assess the macroeconomic risks associated with high household debt, we introduce two shocks separately—a fall in house prices and a rise in interest rates—finding that these shocks have adverse effects on the economy. Focusing on macroeconomic stability, we find that private domestic demand seems to be relatively sensitive to the changes in interest rates and house prices, but the overall output is less affected, mainly due to strong current account surplus. Overall, it can be concluded that in the absence of global shocks, domestic shocks to the economy may not pose a serious risk to macroeconomic stability, when purely focusing on the sensitivity of output growth and unemployment. [ABSTRACT FROM AUTHOR]

This paper takes a fresh look at the determinants of the holding of reserves with the aim of highlighting similarities and differences among emerging markets (EMs), advanced economies (AEs), and low‐income countries (LICs). We apply two panel estimation techniques: fixed effects (FE) and common correlated effects pooled mean group (CCEPMG). FE regression results suggest that precautionary savings' motives, both current account‐ and capital account‐related, are generally the most important determinants of reserves' holding for all country groups. Nonetheless, there is considerable heterogeneity across country groups and over time. The intertemporal motive, a novelty of this paper, has gained importance everywhere. The CCEPMG results confirm the importance of precautionary motives and suggest that current account motives matter only for EMs and LICs and capital account motives matter for all groups while being more relevant for EMs. The CCEPMG results also point to the importance of taking into account the heterogeneous impact of unobserved common factors that affect coefficient estimates and the dynamic process through which reserves adjust to changes. [ABSTRACT FROM AUTHOR]

We utilize country‐level data to investigate the empirical linkage between an economy's industrial structure and the probability of a banking crisis. This paper shows that a higher share of the service sector tends to significantly increase the risk of a banking crisis. We also explore the potential channels through which the industrial structure may affect an economy's vulnerability to external shocks. The result of the analysis suggests that a higher share of the service sector substantially increases vulnerability to a banking crisis through deterioration in profits and worsening of the current account balance. Our study provides some implications for the recent acceleration of deindustrialization in several emerging and advanced economies: for example, the industrial policy should call for a more cautious approach to reduce the potential risks of deindustrialization (increase in crisis vulnerability). [ABSTRACT FROM AUTHOR]

The main objective of this paper is to use the balance of payment constraint growth model to examine the major determinants of income growth in South Korea, emphasizing the importance of exports, capital inflows, and relative prices. The autoregressive distributed lag approach to cointegration is employed to specify the short‐ and long‐run determinants of income growth. The main empirical results suggest that beside the growth in exports, which is the emphasis of the export‐led growth models, growth in capital inflows and relative prices have also played important roles in the growth process in South Korea. A formal test of the model confirmed the validity of the results. We also found that growth in capital inflows has the greatest effect on income growth in South Korea. [ABSTRACT FROM AUTHOR]

The author of any paper with policy implications welcomes discussion of his results, in the knowledge that what is not discussed is forgotten. In this spirit I welcome Dr. Stevens' paper calling for further examination of my framework for analysing the balance-of-payments effects of controls on foreign investment. As he notes, it is puzzling that the earlier literature had devoted so much attention to the hard-to-interpret payback periods instead of looking at the kinds of present-value and rate-of-return calculations initiated by my December 1971 article. Stevens goes on to suggest two revisions in the 1971 article, one dealing with estimated trade effects and one extending my framework to cover the case of rapidly growing outflows checked by permanent controls. These points are worth discussing, since other readers of the 1971 article may also have wanted more treatment of them than space permitted in 1971. Yet it turns out that Stevens' comment fails to blunt my 1971 policy conclusions, and my 1971 article's framework appears to have covered all cases correctly. [ABSTRACT FROM AUTHOR]

This paper expounds on a well-known and widely influential paper ‘Domestic Distortions, Tariffs and the Theory of Optimum Subsidy’ (1963) by Bhagwati in collaboration with V. K. Ramaswami. The message of the paper, which set in trail a number of publications, was that in the case of a small open economy, distortions that steer the economy away from Pareto-optimal outcomes should be dealt with at their source. The Bhagwati and Ramaswami paper established the case for free trade in the presence of domestic distortions, and proved wrong the received wisdom of the day that in the presence of distortions such as externalities, wage rigidities and distorted factor and product markets, a move from free trade to autarky might improve welfare. The article succinctly demonstrated that the correct policy intervention which avoided welfare losses was one which rectified a distortion at its source and is justly regarded as a classic. But in the profession of economics those who question received wisdom are regarded with scepticism at first and then with the riposte that it is all old wine served in new bottles. The Bhagwati-Ramaswami breakthrough was met with the remark ‘it is all in Meade’. This paper takes issue with this judgement. The paper not only refutes the suggestion that the Bhagwati-Ramaswami article has its origins in Meade but also provides a lucid and succinct exposition of Meade's analysis of divergences and shows how Bhagwati and Ramaswami's analysis is vastly different. [ABSTRACT FROM AUTHOR]

This article offers commentary on the paper "The Adjustment Process and the International Role of the Dollar" by Roy Blough, which analyzes the balance of payments linkage and the need to coordinate international monetary policies. The author points out that international imbalances can take the form of internal inflation or deflation, and changes in exchange rates can be used to adjust to disequilibria in international payments. The author supports Blough's claim that if nations can agree about border tax adjustments, international agreements can be reached concerning the adjustment mechanisms now available to international leaders.

The theoretical part of this paper analyses the positive and normative effects of a surprise monetary expansion in a small open economy characterized by imperfect competition and short-run price rigidity in the domestic sector. The temporary output boom fostered by the monetary expansion is shown to come at the cost of a permanent squeeze of the domestic sector. This affects welfare ambiguously, as the overall welfare consequences of the monetary expansion may eventually turn negative for a critical value of external assets. The empirical part of the paper provides evidence in favour of a key role of monetary shocks in driving current account fluctuations in seven major industrialized countries. (J.E.L.: E61, F41). [ABSTRACT FROM AUTHOR]

Research attention to current account imbalances increases because this problem is now manifested as intensified trade wars between countries. Our paper revisits this global issue from a new perspective complementary to previous studies. We propose a simple economics model and find that the current account balance is related inversely to the ratio of income to consumption inequality. This ratio synthesizes all schemes of consumption smoothing, which hinge on political interventions that temporarily attenuate the problem of rising income inequality. Yet shortsighted policy would have a consequential effect on current accounts in the long run. These theoretical findings accord well with our empirical observation that consumption inequality tracks income inequality loosely in deficit countries but closely in surplus economies, with global imbalances affected by financial liberalization and smoothing opportunities. [ABSTRACT FROM AUTHOR]

The new manuals of the National Accounts and of the Balance of Payments are implementing new features regarding services. The paper points out the emergence of an innovative concept of services which is highly relevant but whose consequences may not be fully understood. This new perspective helps to focus on the true nature of services, but it also redefines the borders between services and goods. The paper addresses the problems left unresolved, or brought in, by the revisions. Furthermore, it studies the treatment of non-financial services in the BOP as compared to the SNA. Although the two approaches have been rendered more compatible, the BOP still incorporates several inconsistencies. The hesitancy to completely implement the new services definition tends to somewhat blur the measurement of trade in services. [ABSTRACT FROM AUTHOR]

South Africa is one of the emerging market countries that have received a relatively large amount of foreign capital since the mid-2000s. In South Africa's case, these inflows were partly used to build the country's foreign exchange reserves, but more particularly to finance continued large current account deficits. During the course of the past two years, however, adverse domestic political developments, combined with the potential negative impacts of the unwinding of quantitative easing policies and the normalising of monetary policy in the United States on emerging markets in general, has raised the spectre of a sharp slowdown in foreign capital flows to South Africa and an associated reversal of the current deficit. This paper explores the potential impact of such a development on macroeconomic conditions in South Africa. The analysis consists of macroeconometric model-based alternative scenarios backed up by both the international evidence on the impact of such events and South Africa's own history. [ABSTRACT FROM AUTHOR]

This paper examines current account adjustments before and after the launch of the euro. Applying a dynamic panel model, we provide robust evidence to support that the adoption of the euro facilitates rather than hinders the adjustment of current accounts. This finding agrees with our results that the use of the euro assists real exchange rate and inflation rate adjustments. We also find that the independence of exchange rate regimes from current account, real exchange rate and inflation rate adjustments is observed when standard panel estimation methods are applied and when time‐varying smooth shifts in mean are not controlled. (JEL C33, F32, F41) [ABSTRACT FROM AUTHOR]

This paper examines the determinants of foreign exchange reserves of Brazil for the period 1960–2018. We use empirically robust auto‐regressive distributed lag (ARDL) bounds testing methodology to trace the determinants of foreign exchange reserves of Brazil. We incorporate other relevant variables in the model such as current account balance to GDP ratio, debt to GDP ratio, domestic credit to the private sector as a percentage of GDP, exchange rate, inflation, per capita GDP and real interest rate with foreign exchange reserves in impacting its size in Brazil. We find that long‐run relationship exists between foreign exchange reserves, current account balance to GDP ratio, debt to GDP ratio, domestic credit to the private sector as a percentage of GDP, exchange rate, inflation, per capita GDP and real interest rate. However, we find that variables under study also have unidirectional short‐run causality. Hence, the policymakers to give special attention to the fact maintain a foreign exchange reserve which is optimum keeping in mind their developmental needs. [ABSTRACT FROM AUTHOR]

This paper analyzes the link between the exchange rate misalignments and the external balance under a pegged currency system focusing on the former French colonies of Africa (the CFA zone). Having discussed and chosen an appropriate analytical framework, it addresses the issue of model uncertainty regarding the equilibrium exchange rate model before estimating currency misalignments. The results show that misalignments have a negative and asymmetric impact on the current account. While overvaluation of the CFA franc deteriorates the current account, undervaluation does not improve it. Finally, our results highlight that the export concentration tends to exacerbate the overall negative impact of currency misalignments. [ABSTRACT FROM AUTHOR]

We empirically examine Friedman's hypothesis that floating exchange rates facilitate current account adjustments. The main innovation in the empirical analysis is to control for the sample selection bias. We provide robust evidence that current account persistence decreases with the flexibility of nominal exchange rate regimes and is significantly higher under hard pegs than under floating for industrial countries. The economic driving force of this finding is that the channel of the exchange rate adjustment mechanism dominates in affecting the real exchange rate persistence relative to its shock channel. [ABSTRACT FROM AUTHOR]

Global external imbalances widened persistently over the last several years and have narrowed abruptly over the course of the financial crisis. Understanding the extent to which structural or cyclical factors may have driven these patterns is important to assess the likely evolution of global imbalances going forward, as well as the potential adjustment that can be achieved through changes in policy. This paper assesses the link between structural and cyclical factors and current account balances using a panel of 94 countries from 1973 to 2008. We find that the medium-term evolution of global external imbalances can be related in large part to structural factors including cross-country differences in demographics, fiscal deficits, oil dependency and intensity, stage of economic development, financial market development, and institutional quality. Part of the narrowing in current account balances since the financial crisis appears to be related to various cyclical factors including changes in output growth, oil prices, and exchange rates, and may be expected to reverse alongside the economic recovery. [ABSTRACT FROM AUTHOR]

This paper explores the impact of international trade and financial networks on the current account balances. The network centrality measures are computed based on the structure and volume of trade and financial flows among the countries. A more central position in the international trade network improves the current account balance in developed countries but has no impact on the current account in developing countries. A more central position in the international financial network improves the current account balance in developed and developing countries. Besides, the impact of the international financial network on the current account has become stronger over time. [ABSTRACT FROM AUTHOR]

Working capital management (WCM) is a key question for firms' profitability, especially for small and medium enterprises faced with severe financial restrictions and whose current assets account for a significant part of their investments. These features describe most firms in the livestock industry. However, studies on WCM related to these firms are scarce. Using a sample of 444 Spanish cheese‐manufacturing companies during the period 2010–2016 and applying a dynamic panel data methodology, this paper analyzes the extent to which the main components defining the WCM policies—days sales outstanding, days inventory outstanding (DIO), days payable outstanding (DPO), and cash conversion cycle (CCC)—affect firms' profitability. Empirical evidence reveals a negative effect of DIO and the CCC on firms' profitability, suggesting the need to reduce the level of inventory of cheese‐manufacturing companies. Similarly, the empirical evidence confirms a negative relationship between DPO and firms' profitability. [EconLit Citations: C23, G31, L25, L79, Q12]. [ABSTRACT FROM AUTHOR]

This paper examines the impact of remittances on current account dynamics under alternative monetary and exchange rate policies. The main findings suggest that altruistic remittances precipitate a current account deficit under a fixed exchange rate regime, whereas a surplus is realized when monetary policy follows a Taylor-type rule. Furthermore, self-interest remittances are associated with a current account surplus under a Taylor rule that manages real exchange rate variability or a Taylor rule with aggressive nontradeable inflation targeting. [ABSTRACT FROM AUTHOR]