Real exchange rates and foreign assets : three essays

This thesis consists of three self-contained papers, which contribute to the debates surrounding global imbalances and financial globalization. The papers are unified by their featuring of foreign assets and real exchange rates (RERs) as the central themes. Following the introductory chapter, the first paper revisits the growth impact of RER distortions. The Washington Consensus emphasizes the economic costs of RER misalignment. However, a sizable recent empirical literature finds that undervalued RERs help countries achieve faster economic growth. The study shows that these findings are driven by inappropriate homogeneity assumptions imposed on long-run RER behavior across countries and/or misspecification of the growth equation. When these problems are redressed, the empirical results for a sample of 63 developing countries over the period 1970-2007 suggest that misalignment of the RER, in either direction from the level consistent with external and internal equilibrium reduces economic growth. However, deviations from Balassa-Samuelson adjusted purchasing power parity do not seem to affect growth. The RER should thus be consistent with external and internal balance, irrespective of the purchasing power parity benchmark. The second paper is motivated by the popular view that the surge in China's foreign exchange reserves is due to a distortionary exchange rate policy aimed at keeping the RER undervalued in order to support export-led growth. It undertakes an in-depth empirical investigation to quantify how much "mercantilist" and "precautionary" motives have contributed to the reserve build-up in China during the period 1998Q4-2011Q4. A substantial problem is that theory is consistent with employing two vastly differing approaches to defining and estimating the role of mercantilist reserve accumulation. A priori, either method could generate misleading results. The study shows, however, that the distinction between the two approaches is immaterial in China's case. The results suggest that mercantilism accounts for less than 10 percent of the reserve accumulation. Precautionary motives and other factors seem to be the dominant determinants of the surge in China's international reserves. The third paper studies the macroeconomic impact of valuation effects (changes in net external assets of a country arising from movements in exchange rates or asset returns). In theory, valuation effects are an important channel of international risk sharing through their facilitation of external adjustment. However, the effects can also be economically destabilizing in the presence of frictions in the international financial system. Despite the growing significance of valuation effects in an era of financial globalization, the nature and extent of their macroeconomic effect has not yet been systematically examined, especially in relation to emerging market economies (EMEs). The study examines the macroeconomic impact of valuation effects for 53 countries over 1980-2010. Valuation effects seem to operate as a risk sharing channel in high income countries. For EMEs the results depend on how valuation effects correlate with domestic consumption growth. There is weak evidence that valuation effects act as a risk sharing channel only if the correlation is negative, and are destabilizing otherwise. In the latter case, the welfare loss may well exceed one percent of permanent consumption

Forward pi^0 Production and Associated Transverse Energy Flow in Deep-Inelastic Scattering at HERA

Deep-inelastic positron-proton interactions at low values of Bjorken-x down to x \approx 4.10^-5 which give rise to high transverse momentum pi^0 mesons are studied with the H1 experiment at HERA. The inclusive cross section for pi^0 mesons produced at small angles with respect to the proton remnant (the forward region) is presented as a function of the transverse momentum and energy of the pi^0 and of the four-momentum transfer Q^2 and Bjorken-x. Measurements are also presented of the transverse energy flow in events containing a forward pi^0 meson. Hadronic final state calculations based on QCD models implementing different parton evolution schemes are confronted with the data.Comment: 27 pages, 8 figures and 3 table

Expression of the chemokine receptor CCR5 in psoriasis and results of a randomized placebo controlled trial with a CCR5 inhibitor

Several reports have indicated that the chemokine receptor CCR5 and its ligands, especially CCL5 (formerly known as RANTES), may play a role in the pathogenesis of psoriasis. The purpose of this investigation was to examine the expression of CCR5 and its ligands in chronic plaque psoriasis and to evaluate the clinical and immunohistochemical effect of a CCR5 receptor inhibitor. Immunohistochemical analysis showed low but significant increased total numbers of CCR5 positive cells in epidermis and dermis of lesional skin in comparison to non-lesional skin. However, relative expression of CCR5 proportional to the cells observed revealed that the difference between lesional and non-lesional skin was only statistically significant in the epidermis for CD3 positive cells and in the dermis for CD68 positive cells. Quantification of mRNA by reverse transcriptase-polymerase chain reaction only showed an increased expression of CCL5 (RANTES) in lesional skin. A randomized placebo-controlled clinical trial in 32 psoriasis patients revealed no significant clinical effect and no changes at the immunohistochemical level comparing patients treated with placebo or a CCR5 inhibitor SCH351125. We conclude that although CCR5 expression is increased in psoriatic lesions, this receptor does not play a crucial role in the pathogenesis of psoriasis

The SuperCam Instrument Suite on the Mars 2020 Rover: Science Objectives and Mast-Unit Description

On the NASA 2020 rover mission to Jezero crater, the remote determination of the texture, mineralogy and chemistry of rocks is essential to quickly and thoroughly characterize an area and to optimize the selection of samples for return to Earth. As part of the Perseverance payload, SuperCam is a suite of five techniques that provide critical and complementary observations via Laser-Induced Breakdown Spectroscopy (LIBS), Time-Resolved Raman and Luminescence (TRR/L), visible and near-infrared spectroscopy (VISIR), high-resolution color imaging (RMI), and acoustic recording (MIC). SuperCam operates at remote distances, primarily 2-7 m, while providing data at sub-mm to mm scales. We report on SuperCam's science objectives in the context of the Mars 2020 mission goals and ways the different techniques can address these questions. The instrument is made up of three separate subsystems: the Mast Unit is designed and built in France; the Body Unit is provided by the United States; the calibration target holder is contributed by Spain, and the targets themselves by the entire science team. This publication focuses on the design, development, and tests of the Mast Unit; companion papers describe the other units. The goal of this work is to provide an understanding of the technical choices made, the constraints that were imposed, and ultimately the validated performance of the flight model as it leaves Earth, and it will serve as the foundation for Mars operations and future processing of the data.In France was provided by the Centre National d'Etudes Spatiales (CNES). Human resources were provided in part by the Centre National de la Recherche Scientifique (CNRS) and universities. Funding was provided in the US by NASA's Mars Exploration Program. Some funding of data analyses at Los Alamos National Laboratory (LANL) was provided by laboratory-directed research and development funds

Mercantilism and China's hunger for international reserves

This paper is motivated by the popular view that the surge in China's foreign exchange reserves is due to a distortionary exchange rate policy aimed at keeping the real exchange rate undervalued to support export-led growth. It undertakes an in-depth empirical investigation to quantify how much "mercantilist" and "precautionary" motives have contributed to the reserve build-up in China during 1998Q4-2011Q4. A substantial problem is that theory is consistent with employing two vastly differing approaches to defining and estimating the role of mercantilist reserve accumulation. A priori, either method could generate misleading results. The study shows, however, that the distinction between the two approaches is immaterial in China's case. The results suggest that mercantilism accounts for less than 10% of reserve accumulation. Precautionary motives and other factors seem to be the dominant determinants of the surge in China's international reserves

Should developing countries undervalue their currencies?

The Washington Consensus emphasizes the economic costs of real exchange rate distortions. However, a sizable recent empirical literature finds that undervalued real exchange rates help countries to achieve faster economic growth. This paper shows that re

The equilibrium real exchange rate and macroeconomic performance in developing countries

This article presents first estimates of the growth impact of the equilibrium real exchange rate (ERER) for a sample of 63 developing countries over 1970-2007. The results suggest that real exchange rate misalignment, not the level of the ERER, matters for macroeconomic performance in these countries

After Papua New Guinea's Resource Boom: Is the Kina Overvalued?

Papua New Guinea's (PNG) resource boom has come to an end. Theory suggests that the real exchange rate (RER) should subsequently depreciate in order to restore internal and external balance. In practice, however, the imposition of foreign exchange controls has led to a large backlog in foreign currency orders suggesting that the RER is significantly overvalued. The purpose of this paper is to inform the ongoing policy debate surrounding this issue by estimating the extent to which PNG's RER is currently misaligned. Our results suggest that the kina should depreciate by about 20% to close the gap between the actual and equilibrium value of the RER. Otherwise PNG is likely to pay high economic costs as real overvaluation sustained through foreign exchange restrictions led to resource misallocation, lower economic growth, black markets, and ultimately a balance of payments crisis in many other developing countries in the past