Foreign exchange markets in south-east Asia 1990-2004: An empirical analysis of spillovers during crisis and non-crisis periods

The East Asian crisis of 1997 sparked an extensive literature in an effort to explain the causes and spread of heightened foreign exchange (FX) market pressures in the region. In this paper we model FX movements and calculate spillover effects covering the extended period between 1990 and 2004. Using Markov switching vector autoregressions, we find substantial evidence that FX correlations vary across crisis and non-crisis states, a result that bears implications for international portfolio diversification and reserve pooling. Contagion effects are also present during crises. Finally, we gauge the ability of stock market indices to forecast time-varying transition probabilities and discover positive resultsEast Asia, Currency Crisis

Foreign Exchange Pressures in Latin America: Does Debt Matter?

Latin American countries have been in the eye of economic and ¯nancial storms several times in recent years. Advice from the International Monetary Fund has consistently highlighted the need for sound fiscal policies and lower debt levels. But is public debt relevant? Following a brief discussion of the theoretical issues involved, this paper examines empirically the relationship between public indebtedness and pressures in the foreign exchange market. Alternative measures are used to capture the latter and the analysis controls for a de facto classi¯cation of exchange rate regimes. Estimations of static and dynamic panels for 28 Latin American and Caribbean (LAC) countries report substantial fiscal effects.currency crises, public debt, latin america

Once Bitten: The Effect of IMF Programs on Subsequent Reserve Behaviour

Traditional models have encountered problems in explaining the ac- cumulation of international reserves, particularly in Asia, in the period since the late 1990s. One suggestion has been that countries have sought to self insure against future crises, either because of a perceived increase in the cost of crises or because of the perceived conditionality costs of using IMF credits. This paper others an empirical investigation of these ideas, disaggregating across regions and across IMF facilities. Using both static and dynamic regression techniques we find that IMF pro- grams have had a significant positive effect on subsequent reserve accu- mulation, allowing for other determinants, and that this effect endures over time. We also find that the effect differs between Latin America and Asia, and that it is not simply a phenomenon that is associated with the Asian crisis of 1997/98. The paper goes on to discuss the implications for the design of policy and for the reform of the IMF.International Reserves, IMF

Revisiting Mrs. Machlup's Wardrobe: The Accumulation of International Reserves, 1992-2001

international reserves

What Determines the Implementation of IMF Programs?

For many years analysis of IMF conditionality overlooked the extent to which it was implemented. However, more recently increasing attention has been paid to implementation. Theoretical contributions have focused on the importance of special interest groups, but empirical evidence has failed to provide compelling support for the theory. Indeed, empirical studies have reported mixed results that sometimes seem to be conflicting. This paper identifies a range of economic, political and institutional factors that may, in principle, influence implementation. Using various measures of implementation, it then tests an econometric model designed to capture these influences over 1992-2004 exploiting improved sources of data. The results suggest that significant determinants of implementation are trade openness, the existence of veto players and the amount of resources committed by the Fund. The paper offers an interpretation of the results and discusses the implications for policy.IMF, Implementation

The Viability of Economic Reform Programs Supported by the International Financial Institutions

In seeking to make programs of economic reform supported by the IFIs more successful it is important to ensure that they are viable. Will governments be persuaded to participate? Will they complete the programs they negotiate? And will the IFIs be prepared to provide the resources? This paper formally analyses the factors influencing viability. It examines the constraints on participation and the need for incentive compatibility. The analysis identifies the threats to viability and the direction that reform should take. It places the effectiveness of programs firmly within a political economy framework and extends recent theories of program implementation by examining participation from the viewpoint of both the governments that demand assistance and the IFIs that supply it.

Is There a Beijing Consensus on International Macroeconomic Policy

Some commentators have claimed that there is a growing Beijing Consensus among emerging and developing economies concerning the merits of ChinaÕs economic policies. Within an analytical framework provided by the well known international trilemma, this paper investigates the empirical evidence concerning this claim with specific reference to the adoption of international macroeconomic policies. We document ChinaÕs high degree of exchange rate stability and monetary independence and low degree of financial openness. We then find that there are substantial differences between what China does and what is done in other emerging and developing economies. While we discover some regional and inter-temporal variations, there seems to be little or no support for the existence of a Beijing Consensus on international macroeconomic pol- icy. The proximity of ChinaÕs policies to those in the rest of the developing world may increase in the future; but this is may reflect changes in China rather than elsewhere.Trilemma, China

Economic Evaluation of Positron Emission Tomography (PET) in Non Small Cell Lung Cancer (NSCLC), CHERE Working Paper 2007/6

Background: There are several perceived benefits from introducing positron emission tomography (PET) scanning into the staging of non small lung cancer (NSCLC). However, its greatest primary benefit is the role it can potential perform in reducing the number of unnecessary diagnostic examinations and futile surgeries. Objectives: To evaluate the economic impact and cost effectiveness of PET scanning in the management of potentially operable NSCLC patients using a cost-utility model. Methods: A literature review was conducted to find relevant studies and appropriate parameters to construct a decision model. Two strategies were compared. The first strategy was a conventional work up (CWU) consisting of an x-ray, a chest computer tomography (CT) scan and brochoscopy; the second strategy consisted of a CWU plus a whole body PET scan. These two strategies were applied to two sub-groups of NSCLC patients; those that had received a positive result on their CT scan and those that got a negative result on their CT scan. The cost-effectiveness of each strategy was dependent on a number of variables that were taken from a literature review. Costs were based on the Australian diagnostic related groups, a cost calculation for a chemotherapy course and values obtained from the literature. The life expectancy and utility scores were also taken from the literature and combined to create an incremental quality adjusted life year (QALY) value for PET for each of the patient groups. Results: The mean costs in CT negative and CT positive patients were lower in the CWU strategy, costing $A 20,427 and$A 23,578 per patient respectively compared to the PET strategy ($A 20,826 and$A 24,083 per patient respectively). The mean QALYs for both the CT positive and CT negative patients were higher in PET with 2.91 and 2.11 respectively compared to the CWU of 2.88 and 2.09. The incremental cost effectiveness ratio (ICER) for the CT negative strategy was $A 14,581 and$A 52,039 for the CT positive strategy. Conclusion: The PET strategy in CT negative and CT positive patients appears to be cost effective, however, there is much uncertainty surrounding this base result, particularly in CT positive patients.PET, non-small-cell lung cancer, economic evaluation

Trilemma Stability and International Macroeconomic Archetypes in Developing Economies

In this paper, we examine the stability of international macroeconomic policies of developing countries in the post-Bretton Woods period. We use the simple geometry of the classic, open-economy trilemma to construct a new, univariate measure of inter- national macroeconomic policy stability, and to characterize international macroeconomic arrangements in terms of their semblance to definitive policy archetypes; and, we use the trilemma constraint to provide a new gauge of monetary sovereignty. Using these measures, we find that the greatest international macroeconomic stability among developing economies exists where there are capital controls and limited exchange rate flexibility. The least stable policies occur in the economies with flexible exchange rates and open financial markets. We also find that official holdings of foreign exchange re- serves seem to be weakly linked to greater policy stability, and their link is further weakened where financial markets are open.Trilemma, Foreign Exchange Rate Regimes, International Reserves, Financial Openness, Fear of Floating, Monetary Sovereignty