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Is Exchange Rate Stabilization an Appropriate Cure for the Dutch Disease?

  • Chris Kubelec

    (Royal Bank of Scotland)

  • Filipa Sá

    (The Geographical Composition of National External Balance Sheets: 1980-2005)

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    This paper constructs a data set on the stocks of bilateral external assets and liabilities for eighteen countries in the period from 1980 to 2005. It distinguishes between four asset classes: foreign direct investment, portfolio equity, debt, and foreign exchange reserves. Network methods are used to explore the key facts that emerge from the data. We find that there has been a remarkable increase in interconnectivity over the past two decades and that this has been centered around a small number of countries. In a simulation exercise we show that shocks to one of the central countries generate much larger losses to the network than shocks to the periphery.

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    Article provided by International Journal of Central Banking in its journal International Journal of Central Banking.

    Volume (Year): 8 (2012)
    Issue (Month): 2 (June)
    Pages: 143-189

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    Handle: RePEc:ijc:ijcjou:y:2012:q:2:a:5
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    1. Philip R Lane & Jay C Shambaugh, 2007. "Financial exchange rates and international currency exposures," CGFS Papers chapters, in: Bank for International Settlements (ed.), Research on global financial stability: the use of BIS international financial statistics, volume 29, pages 90-127 Bank for International Settlements.
    2. Philippe Martin & Helene Rey, 2000. "Financial super-markets: size matters for asset trade," LSE Research Online Documents on Economics 20197, London School of Economics and Political Science, LSE Library.
    3. Barry J. Eichengreen & Donald J. Mathieson, 2000. "The Currency Composition of Foreign Exchange Reserves; Retrospect and Prospect," IMF Working Papers 00/131, International Monetary Fund.
    4. Gian-Maria Milesi-Ferretti & Philip R. Lane, 1999. "The External Wealth of Nations; Measures of Foreign Assets and Liabilities for Industrial and Developing Countries," IMF Working Papers 99/115, International Monetary Fund.
    5. Montek S. Ahluwalia, 2002. "Economic Reforms in India Since 1991: Has Gradualism Worked?," Journal of Economic Perspectives, American Economic Association, vol. 16(3), pages 67-88, Summer.
    6. Sergio L. Schmukler & Graciela Laura Kaminsky, 2003. "Short-Run Pain, Long-Run Gain; The Effects of Financial Liberalization," IMF Working Papers 03/34, International Monetary Fund.
    7. Yohei Okawa & Eric van Wincoop, 2010. "Gravity in International Finance," Working Papers 072010, Hong Kong Institute for Monetary Research.
    8. R Portes & H Rey, 2000. "The Determinants Of Cross-Border Equity Flows," CEP Discussion Papers dp0446, Centre for Economic Performance, LSE.
    9. Alberto Felettigh & Paola Monti, 2008. "How to interpret the CPIS data on the distribution of foreign portfolio assets in the presence of sizeable cross-border positions in mutual funds. Evidence for Italy and the main euro-area countries," Questioni di Economia e Finanza (Occasional Papers) 16, Bank of Italy, Economic Research and International Relations Area.
    10. Goetz von Peter, 2007. "International banking centres: a network perspective," BIS Quarterly Review, Bank for International Settlements, December.
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