In this article, we combine two so far separate strands of the economic literature and argue that democratization leads to a real exchange rate appreciation. We test this hypothesis empirically for a sample of countries observed from 1980 to 2007 by combining a difference-in-difference approach with propensity score matching estimators. Our empirical results reveal a strong and significant finding: democratization causes real exchange rates to appreciate. Consequently, the ongoing process of democratization observed in many parts of the world is likely to reduce exchange rate distortions.

This paper examines the impact of a new Central Bank mandate on agricultural competitiveness and on the ability of the agricultural sector to articulate its policy interests within Argentina’s policymaking process. Reforms to Argentina’s Central Bank charter, passed into law in April 2012, loosened restrictions on Central Bank lending to Argentina’s Treasury and authorized the Central Bank to act to reduce unemployment and spur economic development. The Central Bank carries out its new mandate within a policymaking process characterized by strong presidential authority, weak political institutions, powerful provincial governments, and a budget system that politicizes the transfer of fiscal resources from the federal government to the provinces. Within these policymaking dynamics, this paper analyzes the actions of the Mesa de Enlace, an interest group coalition comprised of Argentina’s four largest agricultural producer associations, and its response to changes in Central Bank governance. My argument is twofold. First, I argue that the new mandate in the long run will exert inflationary pressure on Argentina’s real exchange rate, a key determinant of competitiveness for primary commodity exports, particularly soy. Public statements made by various representatives of the Mesa de Enlace indicate strong opposition to the nominal overvaluation (atraso cambiario) of the peso. Second, I argue that the new mandate politicizes an already-politicized Central Bank. Given the agricultural sector’s waning influence in institutionalized policymaking channels, executive intrusion in Central Bank operations is economically harmful. Such government interference serves to diminish agricultural considerations in monetary policymaking and to encourage the Mesa de Enlace’s exploitation of informal channels for interest articulation, creating disincentives for robust investment and causing undesired work stoppages, hoarding, and social protest. / text

O clássico Equilíbrio Econômico nunca foi realidade, especialmente após as primeiras crises dos mercados financeiros. Hoje se sabe que as economias estão longe da situação de equilíbrio, sendo vistas mais como um processo em construção do que um estado estático propriamente dito. Se assemelham a um sistema estocástico, e não determinístico como um dia se pensou. O Brasil é um país jovem, e seus sistemas econômico e político ainda estão em formação. Tendo em vista todas as mudanças e crises que o país tem sofrido em sua história recente, este estudo busca uma forma alternativa para que tais eventos possam ser detectados e, principalmente, de certa forma antecipados, para que as providências cabíveis possam ser tomadas a tempo de se evitar grandes perdas financeiras. Para tal, as medidas de Complexidade de SDL e LMC são aplicadas às séries do câmbio dolar-real, Ibovespa e CDS Brasil e avaliadas durante eventos de crises. Detectados os principais eventos de cada série, \"volta-se no tempo\", ao início da crise, e avalia-se, dada a informação disponível naquele momento, a possibilidade de se detectar a crise em seus primeiros estágios. Ao fim, conclui-se que as Medidas de Complexidade LMC e SDL são robustas na detecção de aumentos de volatilidade nos dados de séries financeiras. Assim sendo, apresentam grande potencial como indicadores precoces de crises financeiras. Para tal, não são necessários cálculos extensivos, nem grandes históricos de dados; e também não são necessárias hipóteses sobre a distribuição de probabilidades destes dados. Acredita-se que este seja o primeiro passo em direção à construção de um monitor de crises em tempo real. / The classical Economic Equilibrium has never been a reality, especially after the first financial markets crisis events. It is known nowadays that economies are far from their Equilibrium, they are seen more as a process under construction, not a static state; a stochastic instead of deterministic process, as it was thought before. Brazil is a young country, hence its economic and political systems are still maturing. In light of all the changes and crises it has been suffering in the recent history, this research seeks for an alternative mechanism to detect and anticipate these crisis events, in order to avoid massive financial losses. To this end, the LMC and SDL Complexity Measures are applied to the Dollar-Real exchange rates, Ibovespa and Brazilian CDS time series during crisis events. After detecting the main events, the idea is to \"turn back in time\", to the events\' inception, and analyse if, given the limited amount of information on that time, the crises could be detected on their early stages. Finally, this research concludes that both LMC and SDL Complexity Measures are robust in detecting volatility increases on the financial series, revealing good potential as crises early warning. However, no extensive calculus, large samples, or strong assumptions about the data probability distributions are needed to this aim. Therefore, these results represent the very first step towards a crises real time monitor.

This study investigates the validity of the real exchange rate-real interest rate differential (RERI) relationship for a sample of twenty-three developing and developed countries. The results based on the Johansen cointegration analysis suggest the validity of the long-run RERI relationship only for a small number of countries including Canada, Italy, Switzerland, Belgium, Chile, Israel and Norway. Real interest rate differentials are found to be positively associated with real exchange rates in the long-run for every country except Israel. The results of the weak exogeneity tests suggest that real exchange rates are the adjusting variables for Italy, Switzerland, Belgium and Israel. Consistent with an endogenous response of domestic interest rates to a real exchange rate shock policy rule, real interest rate differentials are found to be endogenous for the parameters of the cointegration vector for Canada, Chile and Norway.

O clássico Equilíbrio Econômico nunca foi realidade, especialmente após as primeiras crises dos mercados financeiros. Hoje se sabe que as economias estão longe da situação de equilíbrio, sendo vistas mais como um processo em construção do que um estado estático propriamente dito. Se assemelham a um sistema estocástico, e não determinístico como um dia se pensou. O Brasil é um país jovem, e seus sistemas econômico e político ainda estão em formação. Tendo em vista todas as mudanças e crises que o país tem sofrido em sua história recente, este estudo busca uma forma alternativa para que tais eventos possam ser detectados e, principalmente, de certa forma antecipados, para que as providências cabíveis possam ser tomadas a tempo de se evitar grandes perdas financeiras. Para tal, as medidas de Complexidade de SDL e LMC são aplicadas às séries do câmbio dolar-real, Ibovespa e CDS Brasil e avaliadas durante eventos de crises. Detectados os principais eventos de cada série, \"volta-se no tempo\", ao início da crise, e avalia-se, dada a informação disponível naquele momento, a possibilidade de se detectar a crise em seus primeiros estágios. Ao fim, conclui-se que as Medidas de Complexidade LMC e SDL são robustas na detecção de aumentos de volatilidade nos dados de séries financeiras. Assim sendo, apresentam grande potencial como indicadores precoces de crises financeiras. Para tal, não são necessários cálculos extensivos, nem grandes históricos de dados; e também não são necessárias hipóteses sobre a distribuição de probabilidades destes dados. Acredita-se que este seja o primeiro passo em direção à construção de um monitor de crises em tempo real. / The classical Economic Equilibrium has never been a reality, especially after the first financial markets crisis events. It is known nowadays that economies are far from their Equilibrium, they are seen more as a process under construction, not a static state; a stochastic instead of deterministic process, as it was thought before. Brazil is a young country, hence its economic and political systems are still maturing. In light of all the changes and crises it has been suffering in the recent history, this research seeks for an alternative mechanism to detect and anticipate these crisis events, in order to avoid massive financial losses. To this end, the LMC and SDL Complexity Measures are applied to the Dollar-Real exchange rates, Ibovespa and Brazilian CDS time series during crisis events. After detecting the main events, the idea is to \"turn back in time\", to the events\' inception, and analyse if, given the limited amount of information on that time, the crises could be detected on their early stages. Finally, this research concludes that both LMC and SDL Complexity Measures are robust in detecting volatility increases on the financial series, revealing good potential as crises early warning. However, no extensive calculus, large samples, or strong assumptions about the data probability distributions are needed to this aim. Therefore, these results represent the very first step towards a crises real time monitor.

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With the internationalization of financial markets, short-term capital flows to emerging market economies have become an important phenomenon in the world. The papers in this dissertation are concerned with investigating the effects of such flows in the receiving countries. The analysis is cast in a dynamic general equilibrium framework for small open economies. Two of the papers are quantitative investigations of the forces at work in small and relatively poor economies that liberalize trade and capital flows. The common approach of these papers is that of a computational experiment: calibrated simulations constitute a test of whether the models can explain certain dynamics which we observe in the data. The first paper investigates whether a calibrated two-sector neoclassical growth model can explain the magnitudes and the timing of capital flows in the Baltic countries after the fall of the Soviet Union. The results indicate that it can, and that the large and persistent trade deficits which we observe in the data need not be a reason to worry. However, the model also tells us that a reversal of capital flows and large sectoral adjustments lie ahead of the Baltic countries. In the second paper, the focus is on modelling the observed co-movement between consumption and the real exchange rate in Spain, which experienced large capital inflows following the entry into the European Community in 1986. In accordance with episodes of trade liberalization elsewhere, consumption in Spain boomed and the real exchange rate appreciated for several years after 1986. Standard two-sector models with traded and non-traded goods have problems accounting for these facts. The paper explores some mechanisms that can improve the standard modelling framework, and evaluates their quantitative importance in calibrated simulations for Spain. The third paper studies the government’s optimal bailout policy in an environment where sudden stops of capital flows cause financial crises in a small open economy. Real world events, such as the financial crises in the South East Asian countries in 1997, motivate the analysis. Compared to the previous essays, the paper is different in its nature in that it develops a highly stylized environment to analytically study the government’s optimal bailout policy. The paper shows that the government should optimally commit to a policy that only partially protects private debtors against inefficient liquidation. / Diss. Stockholm : Handelshögsk., 2004

This study examined the effect of real exchange rate misalignments on economic growth in sub-Saharan Africa (SSA) by employing 15 countries. The sample is subdivided into 7 lowincome countries and 8 middle-income countries. The dataset spans 41 years covering the period 1970-2010. The study examined this broad issue in piecewise fashion. In the first part, the study examined the validity of the Balassa-Samuelson Hypothesis (BSH) using a simplified regression model and within-effects estimations. The study found a negative and highly significant coefficient of the relative productivity term for the two subsamples (i.e. low-income SSA countries and middle-income SSA countries), in addition to the full sample. Thus, the study found a well-established BSH for the SSA countries considered. Second, the study examined the impact of the real exchange rate undervaluation on economic growth using a standard regression model with key control variables. The study constructed an index of undervaluation, following Rodrik (2008). The study also constructed a Hodrick- Prescott based undervaluation index in order to evaluate the robustness of the main undervaluation index. Generally, the study found undervaluation to promote growth and overvaluation to reduce it. The study found the effect of undervaluation on economic growth to weaken as countries migrate from the low-income bracket to the middle-income bracket. Moreover, the study examined whether the choice of the undervaluation measure mattered. The study found the choice of the undervaluation measure to matter. The Rodrik-type index appeared to overestimate the size of the impact of undervaluation on economic growth. Finally, the study examined whether the impact of undervaluation on growth was linear. The evidence showed that the impact of undervaluation on growth was linear, at least, for this study. The linear impact of real exchange rate movements on economic growth implied that undervaluation enhanced economic growth just as overvaluation hindered it. / Economics / D. Phil. (Economics)

The dissertation consists of four empirical papers in the field of monetary economics. The first paper examines the extent of real exchange rate misalignment in the selected euro area countries, the next two papers shed light on macroeconomic spillovers in the remaining EU countries which are not part of the single currency area, while the last paper focuses on the exchange rate pass-through in the Czech Republic.