Gunther Schnabl

Purchasing Power Parity: Granger Causality Tests for the Yen- Dollar Exchange Rate

The paper analyses the causality between the Japanese-US relative export prices and the yen-dollar exchange rate. It explains why the Japanese yen proved strong even during the economic slump of the 1990s. The paper suggests that the appreciation of the Japanese yen forced the Japanese enterprises into price reductions and productivity increases, which put a floor under the high level of the yen and thus initiated rounds of appreciation. This corresponds to the conjecture of a vicious (virtuous) circle of appreciation and price adaptation.

EMU Entry Strategies for the New Member States

The recent enlargement of the European Union by ten mostly Central and Eastern European (CEE) countries (the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, the Slo-vak Republic, Slovenia, as well as Cyprus and Malta) heralds the enlargement of the Euro-pean Monetary Union (EMU). By the adoption of the EU Treaty the ten new member states have already become members of the EMU—although still with derogation. In contrast to Denmark and the UK who had the possibility to opt against EMU membership, the new member states are obliged to join the EMU as soon as they fulfill the Maastricht criteria for monetary, fiscal and exchange rate convergence. In addition, while the new member states can postpone the full-fledged EMU member-ship by not meeting the Maastricht criteria (as presently Sweden does), all new member states seem to have to a strong intention to join the EMU as soon as possible. The recent accession of Estonia, Lithuania, and Slovenia to the Exchange Rate Mechanism II heralds a new round of EMU enlargement by 2006/07. Why do the new member states want to join the EMU as soon as possible and how can a smooth EMU accession be achieved? These are the questions analyzed in this paper.

The Changing Role of the Yen/Dollar Exchange Rate for Japanese Monetary Policy

This paper studies the role of the yen/dollar exchange rate in the Bank of Japan’s monetary policy reaction function. In contrast to prior estimations of reaction functions based on the Taylor-rule, we allow for regime shifts by estimating rolling coefficients from January 1974 to March 1999. The results show a temporary impact of the exchange rate on monetary policy around 1978/79 and a persistently increasing impact of the yen/dollar exchange rate after 1986. The ris ing importance of the yen/dollar exchange rate for Japanese monetary policy is in line with increasing efforts to stabilize the yen/dollar exchange rate by foreign exchange intervention after March 1999, when the nominal interest rate reached the zero boundary.

Balance of trade and government intervention — Japan as a role model?

Japans industrial and trade policies are often seen as the reason for high Japanese balance of trade surpluses. Does this theory stand up to a close examination of the relationships between balance of trade, trade policy and structural change?

Goals, decision-making mechanisms and instruments in the Japanese-American trade conflict

Trade conflicts flaring up at intervals have become a feature of economic relations between Japan and the USA. The following article examines the history of these conflicts against the background of the two countries’ differing political traditions, goals, negotiating mechanisms and policy instruments.