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1989 | Buch

Introduction Kapitel lesen Erstes Kapitel lesen

The International Adjustment Process

New Perspectives, Recent Experience and Future Challanges for the Financial System

herausgegeben von: Donald E. Fair, Christian de Boissieu

Verlag: Springer Netherlands

Buchreihe : Financial and Monetary Policy Studies

Enthalten in: Professional Book Archive

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Über dieses Buch

The papers collected in this volume are those presented at the fourteenth Colloquium arranged by the Societe Universitaire Europeenne de Recher­ ches Financieres (SUERF), which took place in Helsinki in May 1988. The Society is supported by a large number of central banks and commercial banks, by other financial and business institutions and by personal subscriptions from academics and others interested in monetary and financial problems. Since its establishment in 1963 it has developed as a forum for the exchange of information, research results and ideas among academics and practitioners in these fields, including central bank officials and civil servants responsible for formulating and applying monetary and financial policies, national and international. A major activity of SUERF is to organise and conduct Colloquia on subjects of topical interest to its members. The titles, places and dates of previous Colloquia for which volumes of the collected papers were published are noted, on the last page of this volume. Volumes were not produced for Colloquia held at Tarragona, Spain in October 1970 under the title "Monetary Policy and New Developments in Banking" and at Strasbourg, France in January 1972 under the title "Aspects of European Monetary Union".

Inhaltsverzeichnis

Frontmatter

Opening Addresses

Frontmatter
I. Introduction
Abstract
Our last Colloquium took place in the heart of Western Europe, at Luxembourg. On this occasion, for SUERF’s 14th Colloquium, we have been able to come to a European country which has been influenced in its development from Europe to the West, to the East and to the South, but which has its own style, its own spirit and its own soul. It is well known to us as ‘the land of fens and lakes’, of forests and waters, and of course of the world’s most demanding violin concerto. Finland’s natural beauty, which often inspired Sibelius’ music, is something we hope we shall know and appreciate the better by our coming here, as well as the architectural achievements which have succeeded — as too rarely happens elsewhere — in complementing rather than replacing the gifts of nature. But first, I hasten to remind our members, we must solve the problems of the international adjustment process — the purpose for which the outstanding generosity of our Finnish hosts has enabled us to assemble.
J. R. Sargent
II. The role of financial markets in the adjustment process: the Finnish experience
Abstract
The 1980s have been characterized by deep-seated structural change in financial markets worldwide. Key elements of this process have been the liberalization of markets, international integration and a dramatic increase in market risks and disturbances.
Esko Ollila
III. The international adjustment process
Abstract
SUERF has been well inspired to take the adjustment process as the theme of its 1988 colloquium. Particularly since the crisis of October 1987, the world seems to be concerned mostly with short-term fluctuations — in exchange rates, where very large daily fluctuations are now common, or in interest rates, which are or should be manipulated for demand management. It is then highly appropriate to ask oneself if the longer-term adjustment process is still working, and with what objective.
André De Lattre
IV. Problems of adjustment in developing countries
Abstract
The subject on which I have been invited to make an introductory speech in this colloquium relates to the special problems of adjustment in developing countries. This is indeed a happy coincidence, since stabilisation and adjustment policies in developing countries have been of priority interest to WIDER (World Institute for Development Economics Research, Helsinki), and have constituted an important part of our very first research programme. I am glad to say that we have recently completed a series of studies on the stabilisation and adjustment experience of eighteen developing countries, which have already been released as part of WIDER publications. It is therefore appropriate that I should use the present opportunity to call attention to some of the significant findings of these studies.
Lal Jayawardena

Current and Potential Balance of Payments Adjustments Problems

Frontmatter
V. External adjustment in small open economies — some recent experience
Abstract
The innovations in financial markets during the last few years have had a major impact on the economic policy environment in all countries. The innovations have constituted an international phenomenon; though most of them have been first introduced in the largest markets, they have quickly spread to the small countries. As a result, regulations of various kinds have become less and less effective, financial markets have developed quickly, and integration across borders has advanced at a rapid pace. This has imposed new limitations on national monetary policy. Many of the bigger countries have allowed their exchange rates to float in order to maintain the effectiveness of monetary policy.1 However, in most of the small industrial economies the exchange rate has been fixed within the framework of monetary co-operation (EMS) or by pegging to single currencies or currency baskets. Hence, the external constraints on monetary policy have become increasingly apparent in these countries as monetary integration has proceeded. There is no doubt that this has also affected the division of labour between different policy instruments. But do these countries have any longer enough instruments to simultaneously maintain external and internal balance?
Johnny Åkerholm
VI. Balance of payments adjustment processes in Japan
Abstract
Following continued widening for some time after the exchange rate realignment initiated by the Plaza Agreement of September 1985, the trade surplus in Japan and the deficit in the United States started to decrease in mid-and late 1987, respectively. Despite these improvements, however, the imbalances still remain large. The external imbalances in both countries have, on a number of occasions, destabilized exchange markets, which threatened to thwart sustained growth in the United States and other economies through adverse effects on US external financing, prices, interest rates and stock markets. In fact, stock prices fell precipitously on major markets in October 1987 against the background of market concern about such fragility in the world economy. Given the remaining size of the imbalances, therefore, external imbalances in Japan and the United States need to be corrected consistently.
Yoshimasa Terao
VII. US external adjustment in response to the lower dollar: the J-curve
Abstract
Despite a sizable decline in the exchange value of the dollar since early 1985, the US nominal trade and current account deficits have continued to widen. Between the second quarter of 1985 and the end of last year, the exchange value of the dollar re-traced most of the rise registered over the first half of this decade.1 Yet the nominal trade and current account deficits, as shown in Chart 1, have been slow to turn around; the trade deficit only began to show signs of levelling-off during 1987. While adjustments to changes in relative prices are not expected to occur immediately but take place over some reasonable time horizon, the adjustment in the nominal external balances to this recent decline in the dollar’s value has taken somewhat longer than was generally expected, based on historical experience.
Ellen E. Meade
VIII. Balance of payments adjustment problems — the case of West Germany
Abstract
Global imbalances have been a matter of concern since the end of World War II, and in the majority of years the United States has played a central role in this context.
Otmar Issing

The Modus Operandi of the Process of Adjustment

Frontmatter
IX. Current and prospective balance of payments problems
Abstract
There has been much concern in recent years over “imbalances” in world trade. The United States’ deficit on current account has been the principal focus of attention. It has been associated with continued pressure on the dollar since March 1985 with intermittent sharp movements in exchange rates. Some commentators have warned of the risk of a complete loss of confidence in dollar-denominated financial assets, leading to rising interest rates and recession in the United States.1 Such a recession would have international consequences, especially in the current period of high international indebtedness of many countries.
Gerald Holtham
X. Policy design in the face of a terms of trade shock
Abstract
In Part 1 of this paper we use a simple 4-good model of a small open economy to consider the policy options such a country might adopt in the face of a ‘protracted’ adverse terms of trade shock.
Victor E. Argy
XI. Financial interdependence and external adjustment: some problems posed by US Federal government indebtedness
Abstract
The currently most popular paradigm explaining the state of international payments imbalances rests heavily on the argument that the source of the problem is the US fiscal deficit and the deficiency of private US saving. Nobel laureate James Tobin has recently written, “The moral is this: substantial reduction of the federal deficit is an essential part of the ultimate solution, just as it was a major initial source of the problem”.1 Similarly, Professor Paul Krugman has concluded, “fiscal imbalances contributed to the widening of external imbalances in the 1980s, and fiscal policy can contribute to narrowing these imbalances”.2 These sentiments are echoed by a large body of the academic community and the financial press.
Joseph Bisignano
XII. Mode Opératoire d’ajustement et Marchés Spéculatifs — Premiers Enseignements De La Crise Financiére Récente
Abstract
La crise financière, marquée par l’étonnante baisse de 22.8% en un jour à Wall Street, le lundi 19 octobre 1987, a suscité — et continue de susciter — maints et maints commentaires. Plutôt que de tenter d’ajouter à la cohorte des articles sur les conditions de son déclenchement ou sur ses effets, nous voudrions seulement réfléchir ici sur les premiers enseignements à en tirer au regard du problème fondamental de l’ajustement considéré dans un environnement de marchés spéculatifs.
Henri Bourguinat

Adjustment Policies

Frontmatter
XIII. Exchange Rate Target Zones, the Louvre Accord and Policy Coordination
Abstract
The collapse of the Louvre Accord in the wake of the October 1987 Stock Market crash was a setback for the cause of exchange rate target zones and international policy coordination. Advocates of these causes need to be able to argue that the failure of the Louvre design can be remedied in a future renewal and that the collapse itself has not irrevocably compromised the prospects for a successful renewed initiative.
Michael J. Artis
XIV. Reflections on World Economic Imbalances
Abstract
The world economy is marked by substantial imbalances and as yet there are no definite signs of a spontaneous return to equilibrium. These imbalances, which derive from both the budgetary policy of the United States and the structural disequilibria in Europe, pose a serious threat to global prosperity to the extent that the latter is dependent on international trade and the stability in the international financial markets. Therefore, to maintain the present level of prosperity a substantial reduction of these imbalances is necessary. However, for several reasons this is not a simple task from both the intellectual and the practical policy perspective.
Martin M. G. Fase
XV. The international economic adjustment mechanisms and the coordination of economic policies
Abstract
The magnitude and the persistence of the imbalances that over the past few years have affected the balance of payments have focused all attention on the analysis of their main causes. Particularly, emphasis has been placed on the impact exerted on such disequilibria in the recent cycle, by the tightness of fiscal policy in Europe and Japan vis-à-vis the looseness of US fiscal policy. The floating rate system did fulfill important tasks in the readjustment that followed the oil shock. Nonetheless, it has emphasized, as made clear by the persisting imbalances, that there are significant limits in guaranteeing satisfactory adjustment processes. The Plaza Hotel agreements in September 1985 and the Louvre accords in February 1987 are the most significant evidence of the attempt made by the G5, with a different degree of success, not to rely on the automatic adjustments of the exchange rates alone for the readjustment of their balance of payments.
Luigi Paganetto
XVI. Recent Experience of International Monetary Policy Cooperation
Abstract
The large disequilibriums in major countries’ balances of payments and the sharp exchange rate shifts in the past few years have been an increasing challenge to governments and central banks given declining growth dynamism in the economies of the industrial countries. The need for greater cooperation must be seen in the light of increasing integration of economies: there are a growing internationalisation and liberalisation of the financial markets on the one hand, and the relatively tenuous obligations of the actors in an international monetary system with flexible exchange rates on the other. In view of the fact that individual countries are continuing to pursue economic and monetary policies on their own account, this cooperation may serve to avoid inconsistencies in the economic policies of individual countries and to facilitate their coordination. International monetary policy cooperation is designed to alleviate the tensions between domestic and external objectives in individual countries. Ultimately, internally consistent and internationally compatible economic and monetary policies are to be made possible.
Dietrich Lemke
XVII. The International Monetary System: Recent Developments and Key Issues
Abstract
This paper addresses several fundamental issues raised by recent developments in the world economy and considers their implications for the design and functioning of the international monetary system. We do not make any proposals. Our purpose instead is to identify factors that merit attention in any serious examination of the system.
Jacob A. Frenkel, Morris Goldstein

Special Problems Of Adjustment In Developing Countries

Frontmatter
XVIII. Special Problems of Adjustment in Developing Countries
Abstract
Since 1982, when the first signs of a systemic debt crisis appeared, a generalized process of external adjustment has been under way in the LDCs. The major burden of this process has fallen on these countries’ imports, which have decreased from $583 bn in 1981 to a low of $492 bn in 1986.
Sergio Siglienti
XIX. Private Capital Flows and Developing Country Adjustment: Some Lessons of the Debt Crisis
Abstract
It is not realistic to expect even middle-income debtors fully to service their debt. The combined operation of a high stock of debt, high real interest rates, compound interest and negligible new private capital flows make orthodox adjustment exceptionally severe. The debt crisis is far from being resolved.
Christopher Huhne
XX. The Exchange Rate in the Adjustment Process of Less Developed Countries — A Multifarious Role
Abstract
In the 1950s and 1960s the world economy exhibited a stable and strong economic growth. Balance of payments disequilibriums were moderate and the adjustment policy tended to lean upon demand management. This likewise held for adjustment programmes supported by the IMF. In the 1970s the economic circumstances worsened. Negative trends in economic growth and inflation in the world economy became apparent, the system of fixed exchange rates proved to be untenable and was ultimately abandoned, while serious exogenous shocks started to affect the world economy. Partly in response to these developments, exchange rate adjustments began to figure in the majority of adjustment programmes supported by the IMF. The stronger emphasis on exchange rate policy is illustrated by the fact that the proportion of these programmes which include exchange rate adjustments rose from 31 per cent in the years 1963—72 up to 71 per cent in 1983 — and even 93 per cent in 1983 when programmes for currency union members are neglected (Johnson etal., 1985, pp.6 and 7).
Henk Jager
XXI. Foreign Lending Revisited 1880-1980
Abstract
What can the historical precedents tell us about the conditions under which international capital market flows can be mobilized on a large scale for purposes of economic development? The relevance of this question is self-evident: the surplus available for international lending and investment is largely in the hands of the private sector, and official lending appears unlikely to increase on the scale required — as shown in Table 1, the volume of official development finance showed no increase between 1981 and 1986 (at 1985 prices and exchange rates). But the last attempt to utilise market finance on a large scale for developing countries, in the 1970s, ended in less than complete success.
Robert Pringle

Concluding Address

Frontmatter
XXII. Issues in International Economic Management
Abstract
The notion of ‘adjustment’ entails the notion of some prior disturbance or shock to which the economic system, or some parts of it, must adapt. The Colloquium has considered three main kinds of disturbance, though without giving equal attention to each. Most attention has focused on whatever factors are conceived as having generated the US payments deficit on current account and the corresponding surpluses of other countries, mainly Japan and Germany. The second disturbance discussed was the international debt crisis. The third was the stock exchange bubble of 1987, and the volatility of financial markets generally.
Peter M. Oppenheimer
Metadaten
Titel
The International Adjustment Process
herausgegeben von
Donald E. Fair
Christian de Boissieu
Copyright-Jahr
1989
Verlag
Springer Netherlands
Electronic ISBN
978-94-009-0871-0
Print ISBN
978-94-010-6879-6
DOI
https://doi.org/10.1007/978-94-009-0871-0