Survey
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
International status and usage of the euro wikipedia , lookup
Purchasing power parity wikipedia , lookup
Foreign exchange market wikipedia , lookup
Bretton Woods system wikipedia , lookup
Foreign-exchange reserves wikipedia , lookup
Fixed exchange-rate system wikipedia , lookup
Currency War of 2009–11 wikipedia , lookup
International monetary systems wikipedia , lookup
Reserve currency wikipedia , lookup
Currency war wikipedia , lookup
Global Financial Crisis and Financial Inequality: a Perspective from Current International Monetary System Gang Gong, Yunnan University of Economics and Finance, Part I Stylist Facts of Current International Monetary System Part II Foreign Currency Strategy Part III Financial Crisis: the Outcome of a Weaker Pretending to be a Strong? Part I Stylist Facts of Current International Monetary System Breton Woods System (1944 - 1972) • U.S. dollar obtained its position as a world currency; • But the dollar's behavior had been the regulated: the United States promised that the dollar was convertible to the gold at a fixed rate; • It is a system of fixed exchange regime pegged to the gold; • Opening capital market is also not encouraged, and thus to a certain extent, the dollar floating to the world is limited; • The financial system in the world is relatively stable. It was a golden age to the world economy. • In 1972, the United States broken its promise and thus the Breton Woods system collapsed. Jamaica System (1974 - Present) • The Jamaica system made the world into the era of paper money; • It was a system without restrictions: countries are supposed to be entitled the rights to choose their own exchange regimes and decide whether opening their capital markets. • Under this free system, countries began their competition by adopting different currency strategies that naturally lead to the following stylized facts with regard to international monetary system • Yet, U.S. still holds the advantages given by Breton Woods system, but without the responsibility it token in the Breton Woods system – Dollar is still a world currency; – U. S. still hold a veto power in IMF. Fact 1: The Distribution of Exchange Regime • Developed countries generally choose floating exchange regime without government intervention. • Developing countries usually prefer fixed exchange regime or manageable floating exchange regime, both of which , indicate the intervention from government. 表1-7 各国汇率制度之分布(2011年4月30日) 资料来源:International Monetary Fund(2011) Fact 2: Currency Devaluation • Since developed countries generally prefer floating exchange regime without government intervention, their exchange rates are often close to the exchange rate computed by purchase power parity (PPP), or their currency is not devaluated. • The currencies of developing countries are often devaluated due to the intervention from government, mainly in terms of using domestic currency to buy foreign currency (dollars). 4.76 索马里 3.75 土库曼斯坦 3.19 塞舌尔 3.13 柬埔寨 3.13 马绍尔群岛 3.10 老挝 2.99 布隆迪 2.90 塔吉克斯坦 2.87 基里巴斯 2.81 越南 吉尔吉斯斯坦 2.77 2.74 乌克兰 2.73 埃塞俄比亚 2.72 印度 2.67 白俄罗斯 2.64 巴基斯坦 2.60 冈比亚, 2.55 乌干达 2.44 蒙古 2.43 汤加 2.40 卢旺达 2.40 坦桑尼亚 2.39 尼泊尔 2.38 几内亚 2.37 瓦努阿图 2.37 孟加拉国 2.36 马拉维 2.35 塞拉利昂 2.35 伯利兹 2.32 危地马拉 2.31 乍得 2.30 萨摩亚 2.29 格林纳达 2.29 乔治亚 巴布亚新几内亚 2.25 2.25 海地 2.24 玻利维亚 2.22 古巴 2.22 尼加拉瓜 2.21 多米尼加 2.21 不丹 乌兹别克斯坦 2.18 2.16 毛里塔尼亚 2.16 摩尔多瓦 2.15 巴巴多斯 2.13 布基纳法索 2.10 伊朗 2.08 利比里亚 牙买加 莫桑比克 中国 马达加斯加 吉布提 洪都拉斯 斯里兰卡 埃及 圣萨尔瓦多 马其顿 阿富汗 泰国 所罗门群岛 保加利亚 文莱 塞尔维亚 东帝汶 赞比亚 中国 厄瓜多尔 几内亚比绍 亚美尼亚 厄立特里亚 多哥 利比亚 菲律宾 加纳 突尼斯 阿尔巴尼亚 贝宁 也门 波黑 肯尼亚 巴拉圭 台湾 马里 博茨瓦纳 苏里南 喀麦隆 哈萨克斯坦 圭亚那 圣露西亚 秘鲁 马来西亚 中非共和国 帕劳 阿塞拜疆 哥斯达黎加 2.05 阿根廷 2.03 罗马尼亚 2.01 塞内加尔 1.99 尼日尔 1.98 特立尼达与多巴哥 1.97 阿尔及利亚 1.97 俄罗斯 1.97 波兰 1.96 沙特阿拉伯 1.96 莱索托 1.95 立陶宛 1.91 圣多美和普林西比 1.91 黎巴嫩 1.89 刚果(金) 1.89 斯威士兰 1.89 印度尼西亚 1.89 伊拉克 1.88 叙利亚 1.85 密克罗尼西亚 1.85 巴拿马 1.84 墨西哥 1.84 摩洛哥 1.81 苏丹 1.81 匈牙利 1.80 黑山共和国 1.80 科摩罗 1.80 巴林 1.79 韩国,共和国 1.78 毛里求斯 1.78 哥伦比亚 1.78 斐济 1.78 约旦 1.75 科特迪瓦科特迪瓦 1.73 阿曼 1.73 香港 1.73 捷克 1.69 智利 1.68 爱沙尼亚 1.68 斯洛伐克 1.68 拉脱维亚 1.68 佛得角 1.67 澳门 1.66 马尔代夫 1.66 安提瓜和巴布达 1.65 克罗地亚 1.64 尼日利亚 1.64 新加坡 1.63 巴哈马群岛 1.62 1.60 1.59 1.58 1.57 1.57 1.56 1.55 1.55 1.55 1.52 1.51 1.50 1.50 1.49 1.48 1.48 1.48 1.47 1.47 1.46 1.43 1.43 1.43 1.42 1.42 1.39 1.38 1.38 1.38 1.38 1.37 1.34 1.33 1.32 1.32 1.31 1.31 1.30 1.29 1.29 1.28 1.27 1.27 1.26 1.26 1.25 1.25 多米尼加 土耳其 加蓬 圣文森特及格林纳丁斯 马耳他 南非 斯洛文尼亚 阿拉伯联合酋长国 乌拉圭 波多黎各 纳米比亚 葡萄牙 英国 安哥拉 圣基茨和尼维斯 希腊 西班牙 塞浦路斯 卡塔尔 刚果共和国 美国 以色列 科威特 冰岛 新西兰 德国 巴西 意大利 奥地利 荷兰 加拿大 法国 比利时 卢森堡 爱尔兰 澳大利亚 委内瑞拉 芬兰 瑞典 日本 丹麦 挪威 瑞士 津巴布韦 赤道几内亚 百慕大群岛 1.24 1.23 1.23 1.22 1.22 1.21 1.20 1.19 1.12 1.09 1.09 1.06 1.06 1.02 1.02 1.02 1.02 1.02 1.01 1.01 1.00 0.99 0.99 0.99 0.96 0.96 0.94 0.93 0.92 0.92 0.91 0.89 0.88 0.87 0.86 0.84 0.82 0.81 0.81 0.80 0.69 0.66 0.66 0.60 0.60 0.59 Fact 3: Foreign Exchange Reserve • The choice of floating exchange regime by developed countries also indicates that their central banks will not try to accumulate foreign exchange reserves. • For those developing countries, the choice of government intervention and currency devaluation also indicates that they attempt to accumulate foreign exchange reserve. Foreign exchange reserve over GDP, 2010, major countries (or area) 1.2 1.0 0.8 0.6 0.4 0.2 美国 加拿大 英国 澳大利亚 欧元区 法国 德国 意大利 墨西哥 南非 巴西 印尼 印度 日本 韩国 菲利宾 俄罗斯 马来西亚 中国 泰国 新加坡 香港 0.0 • Note – Hong Kong and Singapore are exemptions, due to their special currency regime. – Although some developed country, such as Japan, still hold a large amount of foreign exchange reserve, it is due to their historical accumulation. The increase in foreign exchange reserve over GDP, 1990-2010, major countries (or area) 9 8 7 6 5 4 3 2 1 英国 欧元区 美国 加拿大 意大利 德国 澳大利亚 法国 日本 南非 墨西哥 巴西 印尼 印度 俄罗斯 韩国 菲律宾 泰国 马来西亚 香港 新加坡 中国 0 Fact 4: Capital Market Opening • The capital markets in developed countries are often more opened. • For developing countries, though there exists a large differential in the degree of opening capital market, on average, their capital markets are often less opened. The degree of openness in capital market versus per capital GDP, 2007 Fact 5: Currency Internationalization • For the currency position, US dollar is dominant and can be regarded as the world currency; • The major currencies in developed countries (e.g., Euro, Japanese Yuan, British Pound, among others) are also largely internationalized; • All currencies in developing are not international currency. • Question: How can we explain these asymmetry? • It is due to the difference in the currency strategy adopted by different countries. Part II Foreign Currency Strategy Definition: Foreign Currency Strategy • The foreign currency strategy includes a set of systems and policies that are related to foreign currencies. • It may include: – The mode of foreign exchange • Exchange regime(e.g. , fixed, floating and manageable floating exchange regime) • Whether devaluating domestic currency? • Whether accumulating foreign exchange? – The management on capital account The Types of Foreign Currency Strategies • Hard Currency Strategy • Soft Currency Strategy Hard Currency Strategy • The objective: exporting or internationalizing domestic currency and its denominated assets as much as possible; • The features: prefer and want to competing, adventuring, door opened, appear to be mighty, • The system arrangement – mode of exchange regime • Floating exchange regime • No devaluation of domestic currency • Need not accumulation foreign exchange, but to export domestic currency and its denominated assets. – capital market opened Why Exporting Domestic Currency? • It symbolizes the strength and popularity of domestic currency in international market, and thus the high degree of internationalization; • The high degree of internationalization indicates that domestic currency can easily be used for importing goods and service, thus taking foreign resources to serve domestic welfare and development; • To form a situation of “benefit intersection”, and thus bind other countries' initiative to maintain the value of domestic currency; • Dare to start a currency war when necessary! Trading Deficit in a Supply-Determined Economy • Due to the exhaustion of surplus labor, developed economy is often a supply-determined economy in normal situation when talking about economic growth. • In a supply-determined economy, one can easily prove that trading surplus in long run can lead to higher per capita GDP other things equal. • Yet trade deficit in long run is generally impossible due to the requirement of international balance of payment unless one can always use domestic currency to pay imports. • Currently, only US and UK are running trading deficit in long run. Currently, only US and UK are running trading deficit in long run. Who Can Implement the Hard Currency Strategy • Only the strong can implement the hard currency strategy – Those who implement well: United States, European Union, Japan, United Kingdom, and other developed countries . • The condition to be a strong – National power (GDP, advance in technology) – Institution (especially financial system). • The weak are always in danger in pretending the strong – Lessons: the countries from former Soviet Union, South America and so on. Soft Currency Strategy • The objective: to protect itself in a competitive international environment • The features: no debt, no adventure, no door opened, accumulating hard currency as much as possible, even allowing some “sacrifice”. • System arrangement – The control of capital account – The control of exchange rate (fixed or manageable floating exchange regime for the purpose to devaluating domestic currency) – No debt, but accumulating hard currency or its denominated assets. The Benefits of Soft Currency Strategy • Do protect the nation’s economic security. – As the capital market is not open, the countries can often stay out from the world financial crisis. • A certain degree of currency devaluation can effectively promote exports and attract foreign direct investment. – To those who possess a large amount of surplus labor in developing countries, this will speed up the digestion of its surplus labor and thus make the economic growth fast. The Costs of Soft Currency Strategy • Giving up the benefits from a hard currency strategy – E.g., obtaining the world resources at low cost and launching a currency war when necessary, etc. • Making the sacrifice from maintaining a soft currency strategy, – E.g., devaluating domestic currency, accumulating hard currency reserve; • Being the victim of currency wars launched by the countries implementing hard currency strategy. • Theoretical weaknesses – The western mainsteam economics relying on "freedom“ and "competition" as its core concept is essentially the theories speaking to the strong. • The lack of support from international rule (e.g. IMF rule) Part III Financial Crisis: the Outcome of a Weaker Pretending to be a Strong? Why Do Some Developing Countries Adopt Hard Currency Strategy? • Yet, in reality , still many developing choose the regime under hard currency strategy, for instance, opening capital market and floating exchange regime • Why? • We believe it is the outcome of dual pressures – The pressure from economic theory. Mainstream economics in terms of free competition is the theory for the strong. – The pressure from IMF among others The push of floating exchange regime by IMF • "Currency manipulation" clause by IMF in 1977; • Obviously, this provision is mainly against those developing countries who implement the fixed (or managed floating) exchange regime • The "provision" has been used by the United States from times to times to attack and China’s exchange regime, whenever crisis occur in its domestic economy. The Push of Opening Capital Market by IMF • When developing countries are in need of assistance, the IMF put forward to lending countries the additional conditions based on the "Washington consensus”, which often include opening capital market. • Precisely because of this, many developing countries, like Haiti, Zambia, the degree of capital market opening is very surprising. The degree of openness in capital market versus per capital GDP, 2007 Question • Why does the United States and its controlled IMF push the developing countries to open the capital market and float the exchange rate? • To this end, it is necessary to discuss how the United States deal with the financial crisis by launching a currency war----QE. Quantitative Easing Monetary Policy • In November 2008, the Federal Reserve launched the first round of "quantitative easing" policy (QE1). The Fed has launched a total of five round of quantitative easing monetary policy. • "Quantitative easing" is usually regarded to be "non conventional monetary policy", because of the purchase of the assets included some unconventional problematical assets. • When the United States launched its quantitative easing monetary policy, Japan, the UK and the euro zone countries are also competing to follow up. “Quantitative Easing” is a Currency War • QE was supposed to inject more liquidity to the domestic financial market; • But it is really a currency war, and may have nothing to do with increasing domestic liquidity! • "The currency war was initiated by a country aimed at devaluating the domestic currency” (Richards, 2011) • To make the dollar devaluated, you need a large amount of U.S. dollars to be exported to the world, that is, dollar floating! Dollar M0 and M1 since 2500000 M1 M0 2000000 1500000 1000000 500000 0 1987 1990 1993 1996 1999 2002 2005 2008 2011 The Purpose of Currency War----Deal with Crisis • In financial crisis, the interest rate in U.S. has been lower to its minimum, or U.S. economy has been caught in a liquidity trap. • When the economy is in a liquidity trap, only the expansionary fiscal policy and export growth that can recue the economy. • Because the United States itself has repeatedly faced the “fiscal cliff”, there is little space for its expansionary fiscal policy. • Therefore, by launching a currency war, making the dollar devaluation, and thus promoting exports is the only choice to deal with the crisis. The Transmission Mechanism of Currency War How Does Currency War Attack the Developing Countries? • On the surface , the purpose of the currency war is to devaluate domestic currency in order to promote exports, thereby resolving the domestic crisis. • However, the huge amount of currency flown out to overseas consolidate its international currency status on the one hand, and thus secure its kidnapping; • On the other hand, it disrupted the financial order of other countries, interfere with the macroeconomic management in other countries, e.g. causing the bubble of the assets; • More importantly, when QE stops and interest rate rises, the money will flow out of the developing countries and thus, the bubble is broken and currency crisis in developing countries will occur. The Transmission Mechanism of Currency Crisis Due to Currency War • Note that after such a round of flowing-in and flown-out, the dollar flowing into a developing country are often much less than the dollar flown out of the country due to the bubble it creates when flowing in. • That is why "the dollar is our currency, but your problem." The Capital Market Opening • For the effectiveness of transmission mechanism with regard to the currency crisis in less developed economy, there is a basic requirement on institutional assumption, namely, opening the capital market. • This type of currency crisis has occurred for many times. • If there is no capital market opening in less developed and emerging economies, the effectiveness of QE will be greatly reduced. Solution: Need the Reform of International Monetary System • Back to the Golden system? – No! No growth • Euro Currency mode? – No! No independent monetary policy • But do need a world currency that should not be a sovereign currency. • The answer might be a dual monetary system. Thank you!