Jacques Mazier

Exchange rate misalignments at world and European levels: A FEER approach

Since the mid-1990s, we observe an increase of world current account imbalances. These imbalances have only been partially reduced since the burst of the crisis in 2007. They reflect, to some extent, exchange rate misalignments, an issue which has been frequently studied in the literature. However, these imbalances, which have reinforced in the 2000s, are also important inside the Euro area. This analysis cannot be reduced to simple estimates of euro misalignment at the world level because of specific constraints that exist for each member of the Euro area. This article aims to examine to what extent intra-European imbalances reflect exchange rate misalignments for each “national euro”.

Investment and the rate of profit in a financial context: the French case

The growth regime prevailing in France since the middle of the 1980s allowed for a recovery of profitability, yet without durable resumption of growth or accumulation of fixed capital. The financialization of this growth regime shows on both the asset and liability sides of the balance sheets. Following a post‐Keynesian framework, we analyse and test the main determinants of real investment and financial capital accumulation for non‐financial companies in France, based on data from the flow‐of‐funds accounts. This analysis points to an arbitrage, prevailing between real and financial accumulation, as a key reason explaining the insufficient recovery of investment.

Exchange Rate Misalignments and International Imbalances a FEER Approach for Emerging Countries

The objective of this paper is to examine the exchange rate misalignments (ERM) of the main emerging countries in Asia and Latin America since the 1980s, so as to shed light on the 2000s by a long term analysis and compare with the industrialized countries’ case. Our results confirm that ERM have been reduced since the mid-2000s at the world level, but the dollar remained overvalued against the East Asian countries, except the yen.

Mobilité du capital et spécialisation en Union européenne

This article focuses on capital mobility highlighted through foreign direct investment ( FDI ) as an adjustment mechanism among EU members. The determinants of intra-european FDI and their impact on country specialisation are successively considered, discerning counterbalancing and agglomeration factors. Several factors such as geographic proximity, trade links and market potential have strengthened FDI polarisation in centre countries. Domestic investments reinforced European specialisation while FDI increased economic diversification and quality intra-branch trade. Classification JEL : F15, F21, R30

Financial Integration and Stabilization in a Monetary Union Without or With Bank Rationing

In a monetary union like the euro zone adjustments facing asymmetric evolutions are more difficult due to fixed intra-European exchange rates. Since 1999, divergences in the evolution of different European economies have been more important than generally expected. The slowdown observed after 2001 has been unequal across the countries. The slow growth of the large continental countries, especially Germany, has contrasted with the better performances of smaller and more peripheral countries like Finland or Ireland and Spain which were led by a housing bubble. Divergences regarding inflation have also been significant. The financial crisis of 2007–08 didn’t hurt all the countries in the same way. Southern European economies have been clearly more touched and the Greek crisis in 2010 has been a threat for the whole euro area. By contrast, Germany, although deeply hurt by the world recession, managed to recover strongly. Such an environment has brought to the fore traditional questions related to monetary union, that is, the nature of adjustment mechanisms and the difficulties due to asymmetric evolutions.

The Role of the Public Sector in a Progressive Construction of Europe

The dominant role of markets, competition and private profit as the regulating mechanisms of economic and social reproduction has during the last years been challenged for theoretical reasons and on the basis of empirical evidence. This raises the question of alternative frameworks and tools for a more democratic and sustainable development. In this chapter, we present and discuss the public sector as a strong and indispensable pillar for a progressive European Social Model (ESM). Its role should be revitalised on the local, regional and national level, and it should be established on the European level.

Dealing with the consequences of exchange rate misalignments for macroeconomic adjustments in the EMU

The euro crisis sheds light on the nature of alternative adjustment mechanisms in the EMU. This article examines the exchange rate misalignments within the euro zone, using a FEER approach. To explore the consequences of these misalignments, we use an open economy SFC model with endogenous interest rates and Eurobonds. Facing a competitiveness loss in southern countries due to misalignments, three sets of alternative economic policy are investigated: a policy‐mix based on tax rebates to improve competitiveness; an increase in intra‐European financing by banks of northern countries; and an issuance of Eurobonds to pool European sovereign debt.

Impact of Monetary Regime and Exchange Rates on ASEAN Economic Integration

The ASEAN countries have experimented contrasted exchange rate regimes since the 1990s. The Asian crisis of 1997 has shown the limits of a simple dollar-peg policy without formal institutions. During the 2000s much effort has been devoted to improving monetary and financial cooperation at the regional level, especially with the Chiang Mai initiative and the Asian Bond market. But results have been limited, mainly due to political issues with the underlying competition between China and Japan. The financial crisis of 2008 has given new interest to the question of monetary cooperation at the regional level. Due to the high degree of heterogeneity of East Asian countries, it appears necessary to preserve the possibility of exchange rate adjustments in a future exchange rate regime. Various forms of monetary regime have been proposed from the Asian Currency Unit (ACU) to the common currency basket or the yen block or the yuan block in a long-term perspective, with improvement at the level of institutional forms, such as an Asian Monetary Fund and Asian bond markets. However obstacles remain the same with a lack of political project and the will of China to preserve its autonomy. A long transition period with adjustable exchange rates regime, based on different types of institutions, might be the more likely, before, may be in the long term, the settlement of a yuan block, which does not mean a yuan zone.

DDsajustements de change, ffddralisme budggtaire et redistribution : comment ssajuster en union monntaire (Exchange Rate Misalignments, Fiscal Federalism and Redistribution)

French Abstract: La crise de la zone euro illustre les carences des mécanismes d’ajustements dans une union monétaire caractérisée par une forte hétérogénéité. Cette situation reflète un diagnostic simple. Au niveau de l’ensemble de la zone, l’euro est proche de son taux d’équilibre. Mais l’euro est fortement surévalué pour les pays d’Europe du Sud, y compris la France, et largement sous-évalué pour les pays d’Europe du Nord, en particulier l’Allemagne (Jeong et ali., 2010). Dans un premier temps, cet article donne une évaluation de ces mésalignements de change au sein de la zone euro, en utilisant une approche FEER. De plus, en utilisant des données de panel sur la période 1994-2010, nous confirmons que les mésalignements de taux de change ont divergé, reflétant des évolutions insoutenables. Enfin, nous estimons les transferts équivalents en % du PIB induits par ces mésalignements pour les différents pays européens. Dans un second temps, nous utilisons une modélisation « stock-flux cohérente » à deux pays d’une union monétaire dans la lignée de Godley et Lavoie (2007) et de Duwicquet et Mazier (2010). Un budget fédéral est introduit avec des dépenses fédérales et des transferts sociaux financés par des impôts fédéraux et par l’émission d’euro-obligations. Le rôle stabilisateur d’un tel budget fédéral est confirmé face à des chocs asymétriques au sein de l’union. Parallèlement, le rôle stabilisateur d’euro-obligations destinées à des projets d’investissement est illustré. English Abstract: The euro zone crisis illustrates the insufficiency of adjustment mechanisms in a monetary union characterized by a large heterogeneity. Exchange rate adjustments being impossible, they are very few alternative mechanisms. This situation reflects a simple diagnosis. At the level of the whole euro zone, the euro is close to its equilibrium parity. But the euro is strongly overvalued for Southern European countries, France included, and largely undervalued for Northern European countries, especially Germany. In a first step, the paper gives an evaluation of these exchange rate misalignments inside the euro zone, using a FEER approach. Using panel econometric techniques over the period 1994-2011, we confirm that the exchange rate misalignments in the euro zone have diverged, reflecting unsustainable evolutions. Last, we give an estimation of the equivalent transfers in % of GDP implied by these misalignments in the different European countries. In a second step, we use a ‘stock-flow consistent’ model of a monetary union with two countries along the lines of Godley and Lavoie (2007) and Duwicquet and Mazier (2010). A federal budget is introduced with federal expenditures and social transfers financed by federal taxes and euro-bonds issuing. Three results are obtained. The stabilizing role of such a federal budget is confirmed facing asymmetric shock or the negative impact of exchange rate misalignments inside the monetary union. Without such a federal mechanism the overvaluation of the Southern currency (Greek or Spanish euro), facing the undervaluation of the Northern currency (German euro), induces a strong slowdown in the South and a cumulative imbalances within the monetary union. Similarly, the stabilizing role of euro-bonds used to finance European investment projects is illustrated. Their role in the pooling of national debts would be the last point to examine.

Assessment and Alternative Proposals on European Structural Policies: Why It Is Right to Support both the Common Agricultural Policy and Research and Innovation Policy

The British Prime Minister Tony Blair has recently put in the centre of the debate on European economic policy the question of the place of the Common Agricultural Policy (CAP) which would represent a too important share of the European budget while, at the same time, almost no support would be given to the research and innovation policy. It would be a policy of the past incapable to face the main issues of the future. Agriculture policy might be renationalised to devote most of the European Union (EU) budget to the policy more turned towards research and innovation. The debate is welcomed but the British position is too simplistic.