Exorbitant privilege and fiscal autonomy

An aspect of the ‘exorbitant privilege’ we examine in this paper is the ability of the reserve currency issuer to run expansionary fiscal policies to stabilize the economy when a negative shock occurs without triggering an adverse reaction of foreign lenders, including, in particular, higher interest rates imposed by global capital markets. To explore this ‘privilege’ we look at the G7, a group of advanced economies that enjoy larger fiscal space than other countries. We estimate a panel regression model to explain the differences in magnitude of fiscal policy responses to common shocks as a function of countries’ reserve currency status. We find that, indeed, the prevalence of this channel is not rejected by the data and that in fact it seems to have become stronger over time, supported by the global build-up of currency reserves

Debt Sustainability after the Pandemic: a Rift between Advanced and Developing Economies?

The aftermath of the Covid-19 health crisis poses major fiscal challenges to many countries, both advanced and developing. A key issue facing policymakers is the amount of available fiscal space given the recent surge in public debt. Exceptional shocks like the pandemic can push countries beyond their debt sustainability limit, inevitably constraining countries’ fiscal space. Against this backdrop this paper estimates the development of public debt limits and ensuing fiscal space for a panel of G20 economies - developed and developing - since the 1990s. This analysis suggests that advanced and developing economies face entirely different conditions for the conduct of independent fiscal policies to address major shocks, with the former generally much better placed

Paths to a Reserve Currency: Internationalization of the Renminbi and Its Implications

In this paper we try to address the question of what could help make the renminbi a reserve currency. In recent years, the authorities in the People's Republic of China (PRC) have made efforts to internationalize its currency through a two-track strategy: promotion of the use of the renminbi in the settlement of cross-border trade and investment, and liberalization of the capital account. We find that if we use only the quantitative measures of the economy, the predicted share of the renminbi in global reserves could reach 12%. However, if institutional and market variables are included, the predicted share comes down to around 2%, which is a more realistic prediction. By reviewing experiences of other reserve currencies, we propose a three-factor approach for the PRC authorities to promote the international role of the renminbi: (i) increasing the opportunities of using renminbi in the international community, which requires relatively rapid growth of the PRC economy and continuous liberalization of trade and investment; (ii) improving the ease of using renminbi, which requires depth, sophistication, and liquidity of financial markets; and (iii) strengthening confidence of using renminbi, which requires more transparent monetary policy making, a more independent legal system, and some political reforms. In general, we believe that the renminbi's international role should increase in the coming years, but it will take a relatively long period before it plays the role of a global reserve currency

A computational-based update on microRNAs and their targets in barley (Hordeum vulgare L.)

<p>Abstract</p> <p>Background</p> <p>Many plant species have been investigated in the last years for the identification and characterization of the corresponding miRNAs, nevertheless extensive studies are not yet available on barley (at the time of this writing). To extend and to update information on miRNAs and their targets in barley and to identify candidate polymorphisms at miRNA target sites, the features of previously known plant miRNAs have been used to systematically search for barley miRNA homologues and targets in the publicly available ESTs database. Matching sequences have then been related to Unigene clusters on which most of this study was based.</p> <p>Results</p> <p>One hundred-fifty-six microRNA mature sequences belonging to 50 miRNA families have been found to significantly match at least one EST sequence in barley. As expected on the basis of phylogenetic relations, miRNAs putatively orthologous to those of <it>Triticum </it>are significantly over-represented inside the set of identified barley microRNA mature sequences. Many previously known and several putatively new miRNA/target pairs have been identified. When the predicted microRNA targets were grouped into functional categories, biological processes previously known to be regulated by miRNAs, such as development and response to biotic and abiotic stress, have been highlighted and most of the target molecular functions were related to transcription regulation. Candidate microRNA coding genes have been reported and genetic variation (SNPs/indels) both in functional regions of putative miRNAs (mature sequence) and at miRNA target sites has been found.</p> <p>Conclusions</p> <p>This study has provided an update of the information on barley miRNAs and their targets representing a foundation for future studies. Many of previously known plant microRNAs have homologues in barley with expected important roles during development, nutrient deprivation, biotic and abiotic stress response and other important physiological processes. Putative polymorphisms at miRNA target sites have been identified and they can represent an interesting source for the identification of functional genetic variability.</p

Internalisation Theory and outward direct investment by emerging market multinationals

The rise of multinational enterprises from emerging countries (EMNEs) poses an important test for theories of the multinational enterprise such as internalisation theory. It has been contended that new phenomena need new theory. This paper proposes that internalisation theory is appropriate to analyse EMNEs. This paper examines four approaches to EMNEs—international investment strategies, domestic market imperfections, international corporate networks and domestic institutions—and three case studies—Chinese outward FDI, Indian foreign acquisitions and investment in tax havens—to show the enduring relevance and predictive power of internalisation theory. This analysis encompasses many other approaches as special cases of internalisation theory. The use of internalisation theory to analyse EMNEs is to be commended, not only because of its theoretical inclusivity, but also because it has the ability to connect and to explain seemingly desperate phenomena

Regional Settlement Infrastructure and Currency Internationalization: The Case of Asia and the Renminbi

The squeeze in United States dollar liquidity that emerged with the global financial crisis highlighted the risks inherent in the current global financial system. Asia was adversely affected by the crisis not only because of its dependence on trade, but also because of its heavy reliance on the US dollar for regional and international transactions. As Asia's role in the global economy continues to expand, its dependence on the US dollar is bound to increase, raising further its vulnerability to future liquidity shocks. The use of regional currencies for bilateral trade settlement could reduce such vulnerability. As demonstrated by the renminbi trade settlement scheme piloted between the People's Republic of China; Hong Kong, China; and Macao, China, the existence of appropriate financial infrastructure could reduce the relatively larger costs of bilateral currency transactions compared with triangular transactions through the United States dollar. As most central banks are securities depositories of government bonds, combining trade settlement with government bond securities settlement could also have large synergy effects without substantial extra costs. This proposal does not require full liberalization of the capital account or full deregulation of capital markets, and is more politically feasible in transition. As such, extending the trade settlement scheme to the rest of Asia and appending a government bond payment and securities settlement system could be a practical solution to international monetary system reform and the diversification of settlement currencies

Beyond the Dollar: rethinking the international monetary system

This report maps out proposals for a new international monetary order and looks at ways in which monetary authorities and political leaders can help prepare the ground for a new system and facilitate the transition