Account Restrictions Research Articles

Optimal Monetary Policy and Capital Account Restrictions in a Small Open Economy

The recent financial crisis has led to large declines in world interest rates and surges of capital flows to emerging market economies. We examine the effectiveness and welfare implications of capital control policies in the face of such external shocks in a monetary DSGE model of a small open economy. We consider both optimal, time-varying restrictions on capital inflows and a simple capital account restriction, such as a constant tax on foreign debt holdings. We then compare the effectiveness of such capital account restrictions under alternative monetary regimes. We find that the optimal time-varying capital control policy is very effective in mitigating foreign interest rate shocks, but less effective for insulating the economy from export demand shocks; in the presence of export demand shocks, an exchange-rate stabilizing monetary policy regime can enhance macroeconomic stability and improve welfare. Under a simple and more practical capital control policy, a monetary policy regime that places larger weight on inflation fluctuations leads to additional gains in macroeconomic stability, although an exchange-rate stabilizing regime leads to even greater gains. Our findings suggest that, with either type of capital control policies, stabilizing the real exchange rate is a robust and effective monetary policy to help weather external shocks.

Scheduling of Cottage Settlement Building

In this paper, the analysis of the general tendencies of line building of cottage settlement is carried out by houses. The analysis of domestic and foreign development showed that many questions connected with formation of schedules of building of objects of settlement and calculation of parameters of works taking into account restriction on resources at development of local plans of settlement by houses, now finally aren't solved.As practice of construction of settlement shows further improvement of a technique of scheduling of building of settlement by houses has to go on an alternative basis and a choice among them the most effective on economic indicators because of modern computer technologies. The calculation procedure and optimization of options of the line organization of construction of houses because of modern computer technologies is offered.The technique of a technical and economic assessment of optimizing solutions of cottage building is offered. In this paper data on application to the developed technique for scheduling of construction of houses of settlement. The developed techniques can find application when developing projects of the organization of mass building of cottage settlement by houses.

Identification of rigid inclusions in the thin plate

The problem of identifying the location of the rigid inclusions in thin plate is considered. The finite element method is being used for discretization the unknown functions of the mathematical model. Geometric inverse problem is formulated in the conditional-correct statement, taking into account restrictions on the number of solutions. Parameters identification is performed via minimization of the Lagrangian.

Micro-Batching Growing Neural Gas for Clustering Data Streams Using Spark Streaming

In recent years, the data stream clustering problem has gained considerable attention in the literature. Clustering data streams requires a process capable of partitioning observations continuously while taking into account restrictions of memory and time. In this paper we present MBG-Stream, a Micro-Batching version of the growing neural gas approach, aimed to clustering data streams by making one pass over the data. MBG-Stream allows us to discover clusters of arbitrary shapes without any assumptions on the number of clusters. The proposed algorithm is implemented on a “distributed” streaming platform, the Spark Streaming API, and its performance is evaluated on public data sets.

Adjustments of Capital Account Restrictions and Exchange Rate Regimes in East Asia

This paper discusses adjustments of capital account restrictions and exchange rate regimes in East Asia. Monetary authorities have two options for these adjustments: Gradual adjustments and rapid adjustments. We analyze the costs and benefits for both adjustment options in each area, i.e., capital account restrictions and exchange rate regimes. The paper provides prominent country cases for each adjustment option to emphasize the benefits for policymakers. We then propose four transition policy options for East Asian countries aiming to relax capital account restrictions and increase flexibility in exchange rates from fixed regimes with capital account controls.

To the problem of rod heating

The construction of control boundary conditions is considered in the paper for the problem of heating a one-dimensional rod up to specified temperature. Two modifications of the method proposed by A. V. Fursikov are presented, these modifications allow us to take into account restrictions posed onto the structure of solution and the control. Results of calculations are presented for heating elements located both outside and inside of the rod. The obtained algorithms admit natural generalizations to a wide class of equations including nonlinear Navier-Stokes type equations and problems of stabilization by initial data and the right-hand side.

RMB Trade Invoicing: Benefits, Impediments and Tipping Points

China has approached the internationalisation of the Renminbi (RMB) by taking cautious but deliberate steps towards a more liberalised economy. The intent to internationalise the currency is clearly expressed in China’s five year plan and further endorsed by the 18th Plenum in 2013. However the pathways, sequencing and timing of internationalisation are the subject of considerable debate. International trade links are well developed with China now the largest trading nation and set to be the largest global economy by the end of the decade. However financial links are still limited and the development of these links is essential for the internationalisation of the RMB. Therefore, with China’s current account largely liberalised but its capital account still subject to widespread capital controls, RMB trade invoicing is very important for the development of offshore RMB business. However, despite the rapid growth in RMB invoicing from zero in 2009 to over 20% of China’s total foreign trade by the end of 2013 (see Chart 1) there is still a substantial gap between trade with China and settlement in RMB. Ito and Chinn (2013) find that the RMB is underrepresented as an invoicing currency (relative to peers) even after controlling for capital account restrictions. It is therefore essential to understand the potential for a currency to be used in invoicing in order to measure its ability to become an investment or a reserve currency.

Measuring and Mending Monetary Policy Effectiveness under Capital Account Restrictions: Lessons from Mauritania

I propose a new approach to identifying exogenous monetary policy shocks in low-income countries with capital account restrictions. In the case of Mauritania, a domestic repatriation requirement is the institutional characteristic that allows me to establish exogeneity. Unlike in advanced countries, I find no evidence for a statistically significant impact of exogenous monetary policy shocks on bank lending. Using a unique bank-level data set on monthly balance sheets of six Mauritanian banks over the period 2006–11, I estimate structural vector autoregressions and two-stage least square panel models to demonstrate the ineffectiveness of monetary policy. Finally, I discuss how a reduction in banks' loan concentration ratios and improvements in the liquidity management framework could make monetary stimuli more effective.

The Effect of Financial Liberalization on Various Financial Crises

This paper examines the effect of financial liberalization on various financial crises by differentiating developing and developed countries. In the last few decades, countries tended to liberalize their financial system. Commonly, financial liberalization is viewed to promote economic growth because it strengthens financial development. However, in contrast, some studies find that financial liberalization induces excessive risk-taking behavior, increases macroeconomic volatility and leads to more frequent crises.Based on a study of 53 countries from Demirguc-Kunt and Detragiache in 1998, 78% of financial crises occurred in the period of liberalization. The study shows that when a country liberalizes its interest rate, it is more likely that country experiences a banking crisis. This fact motivates the author to closely analyze the relationship between financial liberalization and financial crises. The author also wants to contribute to the literature in this area by not only focusing on banking crisis but also adding some other types of crises such as debt crisis, inflation crisis, currency crisis and stock market crash. Since the countries that experienced these crises consist of both developing and developed countries, the author wants to find out whether the effect is the same for developing and developed countries.The dataset which consist of 35 countries data from 1973-2005 is estimated by the linear probability model combined with fixed effect and IV probit model. The author uses the dummy variable for various crises as dependent variable and the financial liberalization index as the main explanatory variable. The financial liberalization uses seven different dimensions of financial sector policy that affect the financial liberalization process. The following seven dimensions are credit controls and excessively reserve requirements, interest rate controls, entry barriers, state ownership in the banking sector, capital account restrictions, prudential regulations and supervision of the banking sector, and securities market policy.As a result, financial liberalization increases the likelihood of banking crisis and debt crisis in both developing and developed countries. Regarding inflation crisis, financial liberalization increases the likelihood of crisis in developed countries but reduces the likelihood of crisis in developing countries. Financial liberalization decreases the probability of currency crisis in developing countries and increases the probability of stock market crash in developed countries. In the last part, the author provides financial liberalization dimensions that have major contribution in affecting each type of crises.

Regulating Capital Flows at Both Ends: Does it Work?

This paper examines whether cross-border capital flows can be regulated by imposing capital account restrictions (CARs) in both source and recipient countries, as was originally advocated by John Maynard Keynes and Harry Dexter White. To this end, we use data on bilateral cross-border bank flows from 31 source to 76 recipient (advanced and emerging market) countries over 1995–2012, and combine this information with a new and comprehensive dataset on various outflow and inflow related capital controls and prudential measures in these countries. Our findings suggest that CARs at either end can significantly influence the volume of cross-border bank flows, with restrictions at both ends associated with a larger reduction in flows. We also find evidence of cross-border spillovers whereby inflow restrictions imposed by countries are associated with larger flows to other countries. These findings suggest a useful scope for policy coordination between source and recipient countries, as well as among recipient countries, to better manage potentially disruptive flows.

The relationship between revenue diversification and bank performance: Do financial structures and financial reforms matter?

This paper contributes to the existing literature by investigating the impact of revenue diversification on bank performance through a broad array of financial reforms, including credit controls, interest rate controls, entry barriers, banking supervision, privatization, and financial account restrictions. This analysis is the first to investigate whether financial structures (bank- or market-based systems) change the effect of diversification on individual bank performance. We use a panel dataset sample from 29 Asia-Pacific countries covering the period between 1995 and 2009, for a total of 2372 banks. Unlike the results of previous studies based on data from the U.S. and Europe, this study confirms the hypothesis of the portfolio diversification effect for the Asia-Pacific banking industry. For bank-based groups, bank performance can be improved through diversification, supporting the “bank-based view” hypothesis. Finally, under different financial systems, the relationships among revenue diversity, financial reforms, and bank performances are multidimensional.

Sovereign ceilings “lite”? The impact of sovereign ratings on corporate ratings

Although credit rating agencies have gradually moved away from a policy of never rating a corporation above the sovereign (the ‘sovereign ceiling’), it appears that sovereign credit ratings remain a significant determinant of corporate credit ratings. We examine this link using data for advanced and emerging economies over the period of 1995–2009. Our main result is that a sovereign ceiling continues to affect the rating of corporations. The results also suggest that the influence of a sovereign ceiling on corporate ratings remains particularly significant in countries where capital account restrictions are still in place and with high political risk.

Sterilisation and Monetary Control by the GCC Member Countries

AbstractThe prevailing dollar peg of the Gulf Cooperation Council (GCC) countries and the absence of any significant current and capital account restrictions led some to believe that these countries have lost monetary independence. However, the paper presents evidence that interest rates of the GCC countries did not converge to the interest rates of the US implying that the assets of the GCC countries are not perfect substitutes to the US assets. This imperfect asset substitutability has allowed the GCC countries to manoeuvre their monetary policies and the central banks of the GCC countries have had some control over their money growth rates by sterilising the changes in international reserves. Results indicate that the monetary authorities of these countries used domestic credit policy to attain some domestic policy objective while engaging in sterilised foreign exchange intervention. This result implies that the proposed GCC central bank should be able to maintain the monetary independence as a group and can reap the benefit of monetary efficiency of the proposed Gulf Monetary Union.

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Capital Account Policies and the Real Exchange Rate

Capital Account Policies and the Real Exchange Rate

BANKS' TOTAL FACTOR PRODUCTIVITY GROWTH IN A DEVELOPING ECONOMY: DOES GLOBALISATION MATTER?

AbstractThe paper provides, for the first time, empirical evidence on the impact of economic globalisation on bank total factor productivity in a developing economy. By employing the Malmquist Productivity Index method, we compute the total factor productivity of the Malaysian banking sector during 1998–2007. Examining different dimensions of economic globalisation, we find evidence supporting for greater trade and capital account restrictions and cultural proximity. On the other hand, personal contacts, information flows, and political globalisation seem to exert significant (negative) influence on banks' total factor productivity levels. Copyright © 2013 John Wiley & Sons, Ltd.

Measuring and Mending Monetary Policy Effectiveness Under Capital Account Restrictions: Lessons from Mauritania

"Volume 2013 (2013): Issue 077 (Mar 2013): Measuring and Mending Monetary Policy Effectiveness Under Capital Account Restrictions: Lessons from Mauritania" published on 27 Mar 2013 by International Monetary Fund.

Measuring and Mending Monetary Policy Effectiveness Under Capital Account Restrictions — Lessons from Mauritania

I propose a new approach to identifying exogenous monetary policy shocks in low-income countries with capital account restrictions. In the case of Mauritania, a domestic repatriation requirement is the key institutional characteristic that allows me to establish exogeneity. Unlike in advanced countries, I find no evidence for a statistically significant impact of exogenous monetary policy shocks on bank lending. Using a unique bank-level dataset on monthly balance sheets of six Mauritanian banks over the period 2006–11, I estimate structural vector autoregressions and two-stage least square panel models to demonstrate the ineffectiveness of monetary policy. Finally, I discuss how a reduction in banks’ loan concentration ratios and improvements in the liquidity management framework could make monetary stimuli more effective.

Effectiveness of Capital Controls: Evidence from Thailand

This paper examines the effectiveness of capital account policies in Thailand during the period 1993–2010. Our results show that policies toward capital account liberalization tend to be more effective than those toward capital account restriction in changing the volume of capital flows. The composition of capital flows also matters for the effectiveness of policy measures. When capital restrictions were introduced in the late 2000s, our results show that there was a switching effect from more capital restricted asset classes toward less restricted ones. This study also finds that the central bank did not gain more monetary autonomy from introducing capital inflow restrictions. However, such restrictions, both inflows and outflows (liability side), could help limit the fluctuations in the nominal exchange rate, especially relative to the US dollar in 2000–2010.

Considering baseline homophily when generating spatial social networks for agent-based modelling

Social networks have become an important part of agent-based models, and their structure may have remarkable impact on simulation results. We propose a simple and efficient but empirically based approach for spatial agent-based models which explicitly takes into account restrictions and opportunities imposed by effects of baseline homophily, i.e. the influence of local socio-demography on the composition of one's social network. Furthermore, the algorithm considers the probability of links that depends on geographical distance between potential partners. The resulting network reflects social settings and furthermore allows the modeller to influence network properties by adjusting agent type specific parameters. Especially the parameter for distance dependence and the probability of distant links allow for control of clustering and agent type distribution of personal networks.