Mis-Leading Indicators?: The Argentinean Currency Crisis

Despite the fact that Argentina has been suffering from recession for years the timing and severity of the recent currency crisis has surprised most observers. This paper analyzes whether the "early warning" or "signals" approach of Kaminsky (1998), Kaminsky/Lizondo/Reinhart (1998) and Kaminsky/Reinhart (1999) could have predicted the Argentinean currency crisis at an earlier point in time. Using a broad set of indicators, it is shown that the forecasting quality of this approach was poor in the case of Argentina.Currency Crisis, Early Warning Systems

Review of "This Time is Different: Eight Centuries of Financial Folly"

Reinhart, Carmen M. and Rogoff, Kenneth (2009) This Time is Different: Eight Centuries of Financial Folly. Princeton University Press

"Does Excessive Sovereign Debt Really Hurt Growth? A Critique of This Time Is Different, by Reinhart and Rogoff"

The worst global downturn since the Great Depression has caused ballooning budget deficits in most nations, as tax revenues collapse and governments bail out financial institutions and attempt countercyclical fiscal policy. With notable exceptions, most economists accept the desirability of expansion of deficits over the short term but fear possible long-term effects. There are a number of theoretical arguments that lead to the conclusion that higher government debt ratios might depress growth. There are other arguments related to more immediate effects of debt on inflation and national solvency. Research conducted by Carmen Reinhart and Kenneth Rogoff is frequently cited to demonstrate the negative impacts of public debt on economic growth and financial stability. In this paper we critically examine their work. We distinguish between a nation that operates with its own floating exchange rate and nonconvertible (sovereign) currency, and a nation that does not. We argue that Reinhart and Rogoff’s results are not relevant to the case of the United States.Government Debt; Government Deficit; Sovereign Default; Reinhart and Rogoff; Economic Growth; Inflation; Modern Money

Methodology for an Early Warning System: The Signals Approach

In this chapter we provide a brief review of the “signals” approach used in this book to assess the probability of a currency or a banking crisis. This methodology was first used to analyze the performance of a variety of macroeconomic and financial indicators around the “twin crises” in Kaminsky and Reinhart (1996) and is described in greater detail in Kaminsky, Lizondo, and Reinhart (1998). In the analysis that follows we focus on a sample of 25 countries over the period 1970 to 1995. The out-of-sample performance of the “signals” approach will be assessed using data for the January 1996-June 1997 period.early warning system, crises, banking, currency, financial indicators

Book review : The precursors of financial crises

"This time is different: eight centuries of financial folly" by Carmen M. Reinhart and Kenneth S. Rogoff. Princeton : Princeton University Press, 2009, 463p.Books - Reviews

Topicality and (Non-)Specificity in Mandarin

Current analyses of specificity are unable to provide an explanatory account for why specific and nonspecific uses of indefinites are available. While Abusch (1994), Reinhart (1997), and Kratzer (1998) provide successful mechanisms for deriving specific readings, they do not provide a fundamental explanation for the availability of this mechanism. This is due to the fact that specific indefinites are treated as involving an interpretive component or procedure unique to themselves: storage (Abusch) or choice function (Reinhart and Kratzer), for example. It would be preferable if specific indefinites could be understood as deriving from the use of independently motivated meaning components and interpretive mechanisms. Here I will pursue the idea, building on Portner & Yabushita (1998), that specificity has to do with the indefinite's interaction with a topical domain (note similarities with the proposals of Enç 1991, Cresti 1995, and Schwarzschild 2000). In this conception, specificity is a matter of degree: the narrower the topical domain, the more specific the indefinite. More precisely, sentences containing specific indefinites will be understood as involving ordinary existential quantification in combination with a topical domain function

Forks in the Road to Rule I

Introduction: Tanya Reinhart pioneered and developed a new and very influential approach to the syntax and semantics of anaphora. It originated in Reinhart (1983a, b) and underwent various later modifications, e.g., Grodzinsky & Reinhart (1993), Heim (1993), Fox (1998, 2000), Reinhart (2000, 2006), Büring (2005). The central innovation concerned the architecture of the theory. The labor traditionally assigned to Binding Theory was broken up into two very different modules. One component (the “real” Binding Theory, if you will) regulates only one type of anaphoric relation, namely variable binding in the sense of logic. A new and different mechanism, variously thought of as a pragmatic principle, an economy constraint, and an interface rule, takes care of regulating other semantic relations, particularly conference. The latter mechanism crucially involves the construction and comparison of alternative Logical Forms and their meanings

What hurts most?: G-3 exchange rate or interest rate volatility

With many emerging market currencies tied to the U.S. dollar either implicitly or explicitly, movements in the exchange values of the currencies of major countries have the potential to influence the competitive position of many developing countries. According to some analysts, establishing target bands to reduce the variability of the G-3 currencies would limit those destabilizing shocks emanating from abroad. This paper examines the argument for such a target zone strictly from an emerging market perspective. Given that sterilized intervention by industrial economies tends to be ineffective and that policy makers show no appetite to return to the controls on international capital flows that helped keep exchange rates stable over the Bretton Woods era, a commitment to damping G-3 exchange rate fluctuations requires a willingness on the part of G-3 authorities to use domestic monetary policy to that end. Under a system of target zones, then, relative prices for emerging market economies may become more stable, but debt-servicing costs may become less predictable. We use a simple trade model to show that the resulting consequences for welfare are ambiguous. Our empirical work supplements the traditional literature on North-South links by examining the importance of the volatilities of G-3 exchange-rates, and U.S. interest rate and consumption on capital flows and economic growth in developing countries over the past thirty years.capital flows trade exchange rate volatility interest rates debt emerging markets advanced economies

Is the US too big to fail?

Why are investors rushing to purchase US government securities when the US is the epicentre of the financial crisis? This column attributes the paradox to key emerging market economies’ exchange practices, which require reserves most often invested in US government securities. America’s exorbitant privilege comes with a cost and a responsibility that US policy makers should bear in mind as they handle the crisis.financial crisis, exchange rates, reserves,government

Output Fluctuations and Monetary Shocks: Evidence from Colombia

Using annual data for Colombia over the last 30 years, we test competing theories that explain macroeconomic fluctuations: the neoclassical synthesis, which posits that in the presence of temporary price rigidity, an unanticipated monetary expansion produces output gains that erode over time with increases in the price level; and an alternative explanation, which focuses on "real" technological or preference shocks as sources of output changes. Coefficients from this system are used to examine the long-run neutrality of nominal quantities with respect to permanent movements in the money stock and the short-run sensitivity of output to inflation.Colombia, inflation, growth, exchange rates,VAR