Advanced Search
MyIDEAS: Login to save this paper or follow this series

Currency undervaluation and sovereign wealth funds : a new role for the World Trade Organization

Contents:

Author Info

  • Mattoo, Aaditya
  • Subramanian, Arvind

Abstract

Two aspects of global imbalances - undervalued exchange rates and sovereign wealth funds - require a multilateral response. For reasons of inadequate leverage and eroding legitimacy, the International Monetary Fund has not been effective in dealing with undervalued exchange rates. This paper proposes new rules in the World Trade Organization to discipline cases of significant undervaluation that are clearly attributable to government action. The rationale for WTO involvement is that there are large trade consequences of undervalued exchange rates, which act as both import tariffs and export subsidies, and that the WTO's enforcement mechanism is credible and effective. The World Trade Organization would not be involved in exchange rate management, and would not displace the International Monetary Fund. Rather, the authors suggest ways to harness the comparative advantage of the two institutions, with the International Monetary Fund providing the essential technical expertise in the World Trade Organization's enforcement process. There is a bargain to be struck between countries with sovereign wealth funds, which want secure and liberal access for their capital, and capital-importing countries, which have concerns about the objectives and operations of sovereign wealth funds. The World Trade Organization is the natural place to strike this bargain. Its General Agreement on Trade in Services, already covers investments by sovereign wealth funds, and other agreements offer a precedent for designing disciplines for these funds. Placing exchange rates and sovereign wealth funds on the trade negotiating agenda may help revive the Doha Round by rekindling the interest of a wide variety of groups.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www-wds.worldbank.org/servlet/WDSContentServer/WDSP/IB/2008/07/14/000158349_20080714114246/Rendered/PDF/WPS4668.pdf
Download Restriction: no

Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 4668.

as in new window
Length:
Date of creation: 01 Jul 2008
Date of revision:
Handle: RePEc:wbk:wbrwps:4668

Contact details of provider:
Postal: 1818 H Street, N.W., Washington, DC 20433
Phone: (202) 477-1234
Email:
Web page: http://www.worldbank.org/
More information through EDIRC

Related research

Keywords: Emerging Markets; Debt Markets; Economic Theory&Research; Trade Law; Currencies and Exchange Rates;

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Prasad, Eswar & Rajan, Raghuram G. & Subramanian, Arvind, 2007. "Foreign Capital and Economic Growth," IZA Discussion Papers 3186, Institute for the Study of Labor (IZA).
  2. C. Fred Bergsten, 1998. "Fifty Years of the GATT/WTO: Lessons from the Past for Strategies for the Future," Working Paper Series, Peterson Institute for International Economics WP98-3, Peterson Institute for International Economics.
  3. Mattoo, Aaditya & Subramanian, Arvind, 2004. "The WTO and the poorest countries: the stark reality," World Trade Review, Cambridge University Press, Cambridge University Press, vol. 3(03), pages 385-407, November.
  4. Edwin M. Truman, 2007. "Sovereign Wealth Funds: The Need for Greater Transparency and Accountability," Policy Briefs PB07-6, Peterson Institute for International Economics.
  5. Kym Anderson & Will Martin & Dominique van der Mensbrugghe, 2006. "Distortions to World Trade: Impacts on Agricultural Markets and Farm Incomes," Review of Agricultural Economics, Agricultural and Applied Economics Association, Agricultural and Applied Economics Association, vol. 28(2), pages 168-194.
  6. Brad Setser, 2007. "The Case for Exchange Rate Flexibility in Oil-Exporting Economies," Policy Briefs PB07-8, Peterson Institute for International Economics.
  7. Gary Clyde Hufbauer & Yee Wong & Ketki Sheth, 2006. "US-China Trade Disputes: Rising Tides Rising Stakes," Peterson Institute Press: Policy Analyses in International Economics, Peterson Institute for International Economics, Peterson Institute for International Economics, number pa78, November.
  8. Aaditya Mattoo & Arvind Subramanian, 2004. "The WTO and the Poorest Countries," IMF Working Papers, International Monetary Fund 04/81, International Monetary Fund.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Schalast, Christoph & Tiemann, Marcel & Tuppi, Pascal, 2009. "Staatsfonds - neue Akteure an den Finanzmärkten?," Frankfurt School - Working Paper Series, Frankfurt School of Finance and Management 114, Frankfurt School of Finance and Management.
  2. Arvind Subramanian & Martin Kessler, 2013. "The Hyperglobalization of Trade and Its Future," Working Paper Series, Peterson Institute for International Economics WP13-7, Peterson Institute for International Economics.
  3. Reisen, Helmut, 2008. "How to spend it: Commodity and non-commodity sovereign wealth funds," Research Notes, Deutsche Bank Research 28, Deutsche Bank Research.
  4. Petr Sedláček, 2010. "State-Run Investment Funds: Major Institutional Investors on Global Financial Markets," Acta Oeconomica Pragensia, University of Economics, Prague, vol. 2010(2), pages 3-22.
  5. Mattoo, Aaditya & Subramanian, Arvind, 2008. "Multilateralism beyond Doha," Policy Research Working Paper Series 4735, The World Bank.
  6. Tsani, Stella, 2013. "Natural resources, governance and institutional quality: The role of resource funds," Resources Policy, Elsevier, Elsevier, vol. 38(2), pages 181-195.
  7. Ho-don Yan & Cheng-lang Yang, 2012. "Does an Undervalued Currency Merit Economic Growth? – Evidence from Taiwan," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 59(1), pages 37-57, March.
  8. Bernard M. Hoekman, 2013. "Global Governance of International Competitiveness Spillovers," RSCAS Working Papers, European University Institute 2013/33, European University Institute.
  9. Saadaoui, Jamel, 2012. "Déséquilibres globaux, taux de change d’équilibre et modélisation stock-flux cohérente
    [Global Imbalances, Equilibrium Exchange Rates and Stock-Flow Consistent Modelling]
    ," MPRA Paper 51332, University Library of Munich, Germany.
  10. Timilsina, Govinda R. & Shrestha, Ashish, 2008. "The growth of transport cector CO2 emissions and underlying factors in Latin America and the Caribbean," Policy Research Working Paper Series 4734, The World Bank.
  11. Freund, Caroline & Pierola, Martha Denisse, 2008. "Export surges : the oower of a competitive currency," Policy Research Working Paper Series 4750, The World Bank.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:wbk:wbrwps:4668. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Roula I. Yazigi).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.