Henri Sterdyniak

The renminbi equilibrium exchange rate: an agnostic view

The supposed undervaluation of the renminbi has been the subject of intensive academic research over the past few years. Using equilibrium exchange rate models (Purchasing Power Parity, BEER and FEER), many authors have concluded that the renminbi is undervalued by 15 to 30% against the dollar. This article shows that the common view is not that obvious. The models used in the estimation (BEER or FEER) assume that the economy is at full-employment, a strong hypothesis for developing economies such as China, whose unemployed amount to 150 million people. On the contrary, we show that China is facing massive unemployment and if investment depends on expected potential demand (from domestic consumption and foreign demand), then an undervalued exchange rate (by traditional standards) is suited for its policy objectives. Therefore the exchange rate can be analyzed as a policy tool used by the Chinese authorities to pursue their objectives. The exchange rate can be undervalued by traditional standards and in equilibrium compared to the governments policy objectives. This article shows that equilibrium exchange rate theories are not suited for developing countries and therefore the concept of equilibrium exchange rate is highly questionable. The final section analyzes the adoption of a managed float regime by the Popular Bank of China and discusses the delicate issue of the best exchange rate regime for China.

An econometric study of the British monetary system

This article aims to explain the British money stock and to shed general light on the British monetary system. The money stock does not depend strictly on popular preferences outside the banks and the authorities. Regulations do not permit the British banks to take an uncovered position in a foreign currency, and therefore to augment their domestic debt assets by borrowing abroad. As a result, these banks have no immediate control over their total domestic assets. Their basic policy variables are their interest rate on loans to private customers, and the rate of services that they provide on their deposits (...).

De l'évaluation économique des transferts fiscaux [Commentaires sur l'article: « L'harmonisation fiscale en Europe et l'économie française » de William Perraudin et Thierry Pujol ]

[eng] This article discusses the methods and results of the preceeding paper. It shows that a transfer between VAT and a tax on wages can be economically neutral or even be useful to increase the progressivity of the French fiscal system. It considers that it is not useful to try to increase the labour supply in a country which already experiences a high unemployment rate. It compares the results of macroeconometric and general equilibrium models to study fiscal reforms.

MAY THE EURO INCREASE EXCHANGE RATE VOLATILITY

The introduction of the euro is such an innovation that it will keep on changing substantially the way the international monetary system works. The GDP of the eleven countries of Euroland amounts to 80 percent of US GDP and is double the Japanese one. Their degree of openness represents 14 percent of their GDP, when France’s or Germany’s were up 23 percent and 28 percent as a European mean (see Table 1).

Consistent Conjectural Equilibria and Economic Policies Coordination

In the recent literature on optimal policy coordination, the essential part is played by the comparison between Nash equilibrium, obtained when each country uses its policy instruments in order to minimise its loss function by taking as fixed its partners’ policy, and the Pareto equilibria, obtained when the countries cooperate efficiently. But the notion of Nash equilibrium is unsatisfactory for two related reasons. In a Nash equilibrium, economic authorities are assumed to consider that their partners do not react to their actions even though in reality they do. The Nash equilibrium depends upon the way each country imagines its partners’ policies, because each country is supposed to reason as if these policies were unchanging. But what do we call an unchanging economic policy? Is it the stability of instruments or the stability of the intermediate targets of economic policy?

How to Manage Public Debts in the Euro Area

The 2008 crisis led to a strong rise in public debts, by around 30 percentage points of GDP in terms of Maastricht debt for the euro area, 50 percentage points for the UK, 45 for the USA, and 60 for Japan (Table 8.1). At the end of 2013, almost all euro area countries will run higher than 60% of GDP public debts. This is also the case for the UK, Japan, and the USA.

Le report de l'âge de la retraite...

Une des premieres decisions du gouvernement issu des elections de 2012 aura ete, conformement aux promesses de la campagne electorale presidentielle, d’elargir les possibilites de depart a la retraite a 60 ans. En 2010, le report progressif a 62 ans de l’âge d’ouverture du droit a la retraite s’etait certes accompagne d’un maintien du dispositif « carrieres longues », instaure en 2003, permettant a ceux qui avaient commence a travailler avant 18 ans de partir en retraite anticipee, mais les conditions pour en beneficier avaient ete durcies1. Pour les personnes nees en 1952, le dispositif prevoyait ainsi la possibilite d’un depart a 58 ans a condition d’avoir commence a travailler avant 16 ans et d’avoir une duree de carriere minimale de 43 ans dont 42 effectivement cotises. Les departs a 60 ans restaient possibles a condition d’avoir travaille une annee avant 18 ans et d’avoir une duree de carriere de 43 ans 1⁄4, effectivement cotisee pendant 41 ans 1⁄4 (ce qui impliquait en fait d’avoir commence a travailler avant 16,75 ans).

Lecture critique de l'ouvrage pour une révolution fiscale. Trois désaccords et certaines convergences

L’article propose une lecture critique de l’ouvrage de Camille Landais, Thomas Piketty et Emmanuel Saez, Pour une revolution fiscale (Le Seuil, 2011). Les auteurs suggerent de rendre la fiscalite francaise plus simple, plus juste, plus progressive. Ils developpent un instrument d’analyse devant permettre a chaque citoyen d’evaluer la fiscalite francaise et les reformes possibles. En meme temps, ils donnent une presentation caricaturale du systeme actuel dont ils denoncent a tort la regressivite. Voulant individualiser l’impot, les auteurs refusent de considerer que les familles partagent leurs ressources, refusent d’utiliser le concept d’unite de consommation, de sorte qu’il est impossible de determiner si la reforme proposee augmente effectivement la redistributivite du systeme. Le simulateur fiscal propose est biaise et ne permet pas d’evaluer les reformes fiscales.

Commentaires sur l'article. « Impact de la crise sur la croissance potentielle: une approche par les modèles à composantes inobservables »

Ces estimations ont deux objectifs : le premier est de déterminer quel est le niveau maximum de production compatible avec la stabilité de l’inflation. Théoriquement, une production supérieure à la production potentielle (un écart de production positif) signifie un risque d’accélération de l’inflation ; le pays devrait donc mettre en œuvre des politiques restrictives. Mais, comme nous le verrons, dans une situation de forte dépression et de tendance à la désinflation, comme en 2010, il est difficile (et finalement peu utile) de déterminer quelle hausse de la production accélérerait l’inflation. Le deuxième est de calculer le niveau du solde public structurel, c’est-à-dire du solde corrigé de l’impact de la situation conjoncturelle, le solde qui serait observé si la production était égale à la production potentielle. Remarquons cependant que le solde structurel incorpore toujours les mesures temporaires de relance mises en œuvre, de sorte qu’il est légitime que ce solde soit négatif en période de dépression. Remarquons aussi qu’aucun argument économique ne justifie un objectif de solde structurel équilibré 1.

How to deal with economic divergences in EMU

Since the launch of the euro, persistent and even rising disparities among Member States have made it difficult to implement short-term or structural common economic policies. The article gives an overview of euro area disparities in terms of growth and inflation and imbalances, mainly unemployment and current accounts. Four explanations are considered: the benefits of the single currency for catching-up countries, the weaknesses of the euro area economic policy framework; the implementation of non-cooperative domestic policies which have induced excessive competition and insufficient coordination and hurt mainly the larger economies; the crisis of the European Continental model in a global world. Four strategies are discussed: increasing market flexibility; moving towards the knowledge society of the Lisbon Agenda; re-nationalising economic policies; introducing a more growth-oriented policy framework.