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Essays on International Macroeconomics

Hughes, Jonathan (2016) Essays on International Macroeconomics. Doctor of Philosophy (PhD) thesis, University of Kent,. (KAR id:57338)

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Abstract

Paper 1:

I investigate the effect of real exchange rate movements on the international distribution of external balances in a model world economy featuring incomplete markets. Intertemporal trade between nations is the only means of insuring against country-specific uncertainty. By changing the return to delaying consumption, fluctuations in the real exchange rate influence the accumulation of foreign assets. In a plausibly calibrated approximation of the model, the proportion of the cross-country dispersion of net foreign assets, the current account and the trade balance that can be attributed to the effect of real exchange rate movements is 23, 35 and 53 percent respectively.

Paper 3:

The link between exchange rate flexibility, the international balance sheet and economic recoveries is analysed in this paper through the application of OLS and two-stage least squares estimators to a dataset covering 201 recovery episodes occurring between 1971 and 2007. An instrument representing the history of exchange rate regime choice in the years immediately preceding the recovery is used to identify exogenous variation in exchange rate flexibility for the two-stage least squares procedure. Our results suggest that when external foreign currency denominated debt liabilities are relatively large, a pegged regime is associated with significantly faster real GDP growth than a non-pegged arrangement during a recovery. This finding can be rationalised on the basis that when external foreign currency denominated borrowing becomes sufficiently large, the adverse balance sheet effects associated with higher levels of exchange rate flexibility begin to significantly outweigh the beneficial expenditure switching effects.

Item Type: Thesis (Doctor of Philosophy (PhD))
Thesis advisor: Leon-Ledesma, Miguel
Thesis advisor: Otsu, Keisuke
Uncontrolled keywords: open economy macroeconomics; international finance; macroeconomic uncertainty; real exchange rates; international distribution of external balances; international capital flows; economic recoveries; exchange rate regimes; international balance sheet
Divisions: Faculties > Social Sciences > School of Economics
Depositing User: Users 1 not found.
Date Deposited: 19 Sep 2016 17:00 UTC
Last Modified: 01 Aug 2019 10:40 UTC
Resource URI: https://kar.kent.ac.uk/id/eprint/57338 (The current URI for this page, for reference purposes)
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