International Business Cycle Coherence and Phases- A spectral analysis of output fluctuations of G7

This paper examines international linkages of co-movements in output fluctuations amongst G7 economies in the frequency domain. The paper has identified patterns in international business cycle co-movements among the G7, offering a general outlook of international business cycle co-movements and detailing the lower frequency, higher frequency and middle range characteristics of international linkages of output fluctuations. The main findings of the study are that co-movements among G7 economies are considerably stronger at lower frequencies, with clearer patterns of linkages of international output fluctuations, than those at higher frequencies and in middle ranges. The results and findings show support for real business cycle theory being extended to an international arena, with long effect real shocks impacting economies across borders.business cycles, frequency domain, coherence, phase

Cycles and Common Cycles in Property and Related Sectors

This paper examines cycles and common cycles in the property market and the economy. While focusing on common cycles, the study also incorporates common trends in the meantime, so it covers the whole spectrum of dynamic analysis. It has been found that property shares common cycles, particularly with those sectors that are the user markets of property. The mechanisms of common cycles and the relative magnitudes of cycles of the sectors related to property are discussed to shed light on property market behavior.Common cycle, common trend, phase, property

Assessment on Valuation of RMB – a triangular analysis approach

exchange rate, RMB, US dollar, euro

A Financial Approach to the Balance of Payments

A new approach to addressing balance of payments issues by analyzing the constituents of the financial account has been developed in this study and is referred to the financial approach accordingly. It pays attention to the different roles of foreign direct investment (FDI) and international portfolio investment (IPI), both of which have witnessed phenomenal increases in the last four decades. On the one hand, balance on the financial account exclusive of changes in official reserves is no longer negligible or inconsequential, and can no longer be neglected. On the other hand, FDI and IPI differ in countries’ international economic relations, with different effects of FDI and IPI on trade and trade balance in particular. Responding to a noticeably changed global economic environment, this new approach is effective in addressing balance of payments issues in a new era of globalization. The illuminating results lend support to the theoretical propositions, thereby opening up a new line of research for furthering theoretical and empirical inquiries.financial account, foreign direct investment, international portfolio investment, trade balance, current account

Reverse Shooting of Exchange Rates

Reverse shooting of the exchange rate has been put forward in this paper by scrutinizing the adjustment and evolution of the exchange rate towards its new long-run equilibrium level following a change in money supply. Joint and sequential effects of covered interest rate parity and the sticky price on the rise, from the short-term through the long-run horizon, result in a feature of reverse shooting of the exchange rate. Regardless of what the immediate response of the exchange rate to the change in money supply can be argued for, reverse shooting homogenizes the evolution path of exchange rate adjustment and movement from different views.exchange rate, reverse shooting

A Triangular Analysis of Exchange Rate Determination and Adjustments - The case of RMB, the US dollar and the euro

Exchange rate determination is of phenomenal importance in international economic relations and should be scrutinized with diverse perspectives and from various points of view. While RMB is pegged to the US dollar, the exchange rate between RMB and the euro is not fixed, due to that the exchange rate between the euro and the US dollar is not fixed. Since RMB is not a small currency, its pegging to the US dollar would have a profound effect on the floating exchange rate between the US dollar and the euro, forcing the exchange rate between the US dollar and the euro to depart from a “fair” market determined rate if the exchange rate between the US dollar and RMB is not set right. The above scenario provides us with a means to assess the fairness of exchanges rates resulting from pegs. Our analysis suggests that when RMB is overvalued relative to the US dollar, the euro would tend to be overvalued relative to the US dollar too, and vice versa. This in turn leads to a channel for examining whether RMB is undervalued or overvalued against the US dollar, an argument all stemming from the effective peg of RMB to the US dollar. It is to scrutinize the exchange rate of the US dollar vis-à-vis the euro to establish ultimately whether RMB is undervalued or overvalued vis-à-vis the US dollar. That is, an overvalued euro currency vis-à-vis the US dollar would imply a kind of overvaluation of RMB vis-à-vis the US dollar; or put it another way, an undervalued euro currency vis-à-vis the US dollar would justify that RMB is undervalued vis-à-vis the US dollar. As a corollary derived from the above analysis, if the objective of the monetary authorities is to float RMB at the right exchange rate and at the right time, a triangular rotation approach to anchoring currencies can be appropriate. A peg of RMB to a basket of currencies is unfeasible, inconvenient and moreover, unable to avoid being criticized for pegging at an artificially low value as its peg to the US dollar. While it has been increasingly acknowledged that competitive advantages in international trade in the long run can rarely benefit from distorted exchange rates, a notion of currency undervaluation remains cumbersome.exchange rate, RMB, US dollar, euro

A Spectral Analysis of Business Cycle Patterns in UK Sectoral Output

This paper studies business cycle patterns in UK sectoral output. It analyzes the distinction between white noise processes and their non-white noise counterparts in the frequency domain and further examines the associated features and patterns for the process where white noise conditions are violated. The characteristics of these sectors, arising from their institutional features that may influence business cycles behavior and patterns, are discussed. The study then investigates the output of UK GDP sectors empirically, revealing their similarities and differences in their business cycle patterns.business cycle patterns, frequency domain