Aleksandr V. Gevorkyan

Assessing Recent Determinants of Borrowing Costs in Sub-Saharan Africa

This study explores macroeconomic implications of the sovereign bond rush that has been taking place in sub‐Saharan Africa since 2006. The focus is on the sub‐Saharan sovereign bond yields as proxies for the regions ability to raise new funds on international markets. Despite the subcontinents tour‐de‐force entrance to the international bond market, this paper reveals that recent (since early 2000s) borrowing in foreign currency is not without macroeconomic risk. Empirically this paper finds that sovereign bond yields are significantly influenced by global volatility, commodity prices and global liquidity - all factors that are out of the control of the sub‐Saharan economies in question. These findings suggest that portfolio repositioning by institutional investors prompted by improved growth prospects and implicit monetary policy tightening in the advanced economies or heightened risk perceptions, are likely to result in increased borrowing costs for the sub‐Saharan bond issuers and affect their ability to raise funds in international markets. Furthermore, a change in borrowing costs might lead to higher debt‐service costs and policy uncertainty, which in turn could lead to suboptimal investment levels and, ultimately, hinder economic development.

Derivatives, Commodities, and Social Costs: Exploring Correlation in Economic Uncertainty

Derivatives market has been epitomized with gross evil in the wake of the global economic crisis that ensued in 2008. This study argues for more extensive understanding of the phenomena as dynamics previously viewed unrelated now exhibit correlation. As empirical reference, this research relies on recent trends in the commodity futures contracts with analytical relation to the currency exchange rate and by extension the financial and real sectors. With varying intensity often speculative sporadic trading in crude oil, coffee, wheat, rice, sugar, and gold benchmark futures may inflict detrimental effects on the global development efforts. The issue is most acute in the emerging markets facing inflation fears, speculative movements of foreign currency-denominated funds, and underlying domestic currency value. This dynamic reasserts the concept of fundamental uncertainty allowing us to connect the typical risk-return stand with a dialectical unity of the financial, real sector, and social costs. Ultimately, issues raised in this study relate to the problems of social stability and sustained economic development in the postcrisis environment given high frequency and volatility of capital flows. As such, this chapter contributes to the literature that bridges financial empirical analysis with modern socially responsible economic development.

The foreign exchange regime in a small open economy: Armenia and beyond

Purpose Offering an example of a small open developing economy, the purpose of this paper is to explore the reasons for relative stability in Armenia’s foreign exchange market. Relying on a single currency and derived cross-currency exchange rates, the paper models short-term effects between exchange market pressure and financial and macroeconomic factors. Design/methodology/approach Following a literature review, the paper sets the macroeconomic context with an initial variance comparison of standard currency pairs and derived cross-currency exchange rates. Then, the core analysis is carried out with a vector error correction model, focusing on short-term cross-dynamics in monthly data. The orthogonal impulse response function analyses help solidify and further inform relevant conclusions. Findings Three broad factors influence Armenia’s foreign exchange market: external push factors; domestic banking sector competition, and foreign currency risk perceptions; and domestic macroeconomic and dual, cross-pair, exchange rate target priorities. The central bank’s implicit management of the foreign exchange market’s expectations, pull factor, is consistent with trader market power’s contribution to lower volatility. Yet, the risk of financial and real-sector decoupling remains. Originality/value The results are relevant for emerging markets attempting to leverage the global liquidity and low interest rates, while being exposed to external pressures in the post-crisis environment, in which international reserves may be scarce while currency stability is an implied priority. This study can be further adapted to a more comprehensive structural short-term analysis of currency determination or similar dynamics in other small open economies.

Exchange Rate Targeting and Gold Demand by Central Banks: Modeling International Reserves Composition

ABSTRACT This article explores the composition of international reserves under a central bank’s exchange rate policy target. The model allows for numerical estimation of a shadow price of the target exchange rate, interpreted as the central bank’s sacrifice of policy precision for additional unit of portfolio variance or return. The simulations indicate a percentage range gold demand by monetary authority in two regimes under multiple equilibria. Accumulating foreign reserves as precautionary policy suggests increasing shares of gold demand. The central bank would incur greater exchange rate target sacrifice if it wants to achieve higher portfolio returns. The results suggest that ability to target the exchange rate is unaffected by the higher volatility of monthly returns on gold.

Transition Economies : Transformation, Development, and Society in Eastern Europe and the Former Soviet Union

n/a https://mc.manuscriptcentral.com/rrpe Review of Radical Political Economics

The End of Alchemy: Money, Banking, and the Future of the Global Economy

emphasizing the importance of state-funded education. Regrettably, Milanovic does not devote much attention to the financial sector, which contributes hugely to inequality while adding little social value. His discussion of immigration might also seem a little shallow, since he does not consider the complex cultural dimension of interactions between immigrants and native populations in Europe. A minor quibble: Milanovic’s discussion, in Chapter Five, of the way in which scalable and unscalable jobs create a new kind of division of labor, might have been more useful in the first chapter, since it explains one of the key mechanisms of job evolution in the era of new communication technologies. Through its innovative rethinking of the Kuznets wave, Milanovic’s book sheds light on several key themes of our era: the new mechanisms underlying inequality, the new division of labor engendered by technological change, and the impact of these on our political systems. Instructive and clearly written, it will interest not only economists but also political scientists, historians and social scientists specializing in immigration, citizenship and the new challenges of the taxation system. This book also helps us to grasp the wider context of recent phenomena such as the rise of populist movements and nativists in the West, and the polarization between different social classes, and also to understand the importance of Chinese domestic politics in terms of the future of international relations.

Modeling Climate Change Effects on Renewable and Non-Renewable Resources

This paper models climate change effects differentiating across primary commodities based on their exhaustibility factor. There is a direct pass-through to futures prices, but the impact differs across diverse commodity groups. This paper develops a theoretical model simulating dynamic consumption paths of renewable and non-renewable resources. Dynamic paths are calculated applying the Non-linear Model Predictive Control (NMPC) methodology. Current analysis draws a clear connection between intensifying impacts of climate change, commodity futures price volatility, rising urban-dependency pressures and the renewable and non-renewable resources production and consumption balance among advanced and emerging economies. Accumulated evidence suggests probable higher volatility in commodity prices in the near term, directly affecting small and large economies across all regions.

Theory and Practice in a Sensible Economic Policy Mix: A Glance at Willi Semmler’s Contributions to Empirical Macroeconomics

The Global Financial Crisis, which peaked in late 2008, accentuated the urgent need for reconciliation between the theoretical and practical components of macroeconomic theory. Worldwide, apart from a few, economists faced the profession’s dire challenge to develop an ability to think outside conventional macroeconomic equilibrium models. Such ability, of course, pre-supposes an open approach to dynamic macroeconomic modeling, one founded in a profound understanding of the diverse currents within the many traditions of economic thought. One of such economists of the highest caliber is Professor Willi Semmler, in whose honor this book is compiled, celebrating his life and grand scientific accomplishments. His work encompasses research on problems of dynamic modeling, computational methods in economics and finance, financial economics, exchange rate, credit risk, and ultimately climate change and the linkages between financial and “real” economic activity. Offering a rundown of the book’s structure, this chapter mainly discusses Dr. Semmler’s achievements across three pillars of academia and science: teaching, research, and mentorship.

Emerging Markets and the Post-2008 World

Emerging markets is a buzzword in financial economics. However, just exactly what is included in the definition often varies depending on the selection criteria applied. For the purposes of this volume the definition is purposely left broad, with no ambition to develop a generic emerging economy profile. Instead, this study includes contributions on economies conventionally identified as emerging (e.g., most of Latin America and some of Eastern Europe) and those with a developing-country profile (e.g., parts of Sub-Saharan Africa and Asia). This chapter goes over some recent macroeconomic trends in emerging markets. A “redefined fundamental uncertainty” is suggested as a peculiar characteristic of the post-crisis global financial economy. Some general risks, opportunities, and future outlook across the many country sub-groups paving the way to and introducing subsequent chapters are discussed as well. The chapter also introduces the volume with a brief synopsis of each chapter contribution.

Is Russia Still a BRIC

Can Russia break its dependence on oil and diversify its economy (its so-called resource curse)? Aleksandr Gevorkyan argues that it has the potential and may be well on the way to doing so—that is, beating the curse and becoming a full-fledged global player again.