Internationale Wirtschaftsbeziehungen - Theorie und Praxis anhand von Beispielen

  WS 1997 98 Internationale Wirtshaftsbeziehungen  2

  Inhaltsverzeichnis  

1.  Einleitung und Problemstellung  2

2.  Effect of Economic Shocks Under Fixed Exchange Rate Regimes  3

3.  Sterilized and - Foreign Exchange Intervention  7

4.  Case Study: Fixed Exchange Rate Collapse Mexico 1982  10

5.  Why Countries Choose Fixed Exchange Rates and Why these Regimes Collapse  13

6.  The Asian Currency Crisis of 1997  18

7.  Summary  27

8.  Literaturverzeichnis  30

1.  Einleitung und Problemstellung  

  Mir wurde von Herrn Univ Prof Dr Streißler die Möglichkeit geboten die Übung Inter  

  nationale Wirtschaftsbeziehungen aus dem Wintersemester 1997 98 mit dieser Arbeit  

  abzuschließen In der Übung habe ich ein Referat über das System von Bretton Woods  als

  Leistungsnachweis gehalten Aufgrund meiner Krankheit war es mir leider nicht möglich  die

  nötigen Abschlußtests zu machen Diese Arbeit stellen für mich persönlich die Möglichkeit  dar,

  das in der Vorlesung und Übung gelernte unter Beweis zu stellen und in einem konkreten  

  Zusammenhang anzuwenden Das Erarbeiten des Themas war für mich eine große Heraus  

  forderung und ich hoffe daß das Ergebnis die Bemühungen Wert war Als wesentliche Literatur  

  habe ich das Buch International Economics von Krugman und Obstfeld in der 4 Auflage  

  verwendet hinzu kommen Ausgaben der Zeitung The Economist  

  Die Aufgabenstellung war ein konkretes Thema abzuhandeln Ich habe hier die überaus  

  interessanten Komplex der Währungsveränderungen in Asien der letzten Jahre und warum  es

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hier zum Crash gekommen ist, hergenommen. Diese dramatischen Entwicklungen haben enorme Auswirkungen auf die wachstumsstärkste Region (auch als Hoffnungs- und Zukunfts- region bezeichnet) und, wie man in den letzten Wochen sieht, auch auf unsere Volks- wirtschaften. Ein Verständnis für die Gründe und die konkreten Auswirkungen ermöglicht es darüber hinaus, die derzeitigen Lösungsversuche in den einzelnen Ländern sowie die Diskussion um Weltbank und Internationalen Währungsfonds kritisch zu bewerten. Da die vorhandene Literatur in englischer Sprache abgefaßt ist, war es für mich eine weitere Herausforderung die Arbeit in Englisch zu verfassen.

Zuerst habe ich die Fragestellung abgehandelt, warum Länder fixe Wechselkurse wählen, dies ist die wesentliche Grundlage für die anschließende Diskussion und die Behandlung der Beispiele, wie Mexiko oder Asien. Wie in den letzten Wochen und Monaten zu sehen ist, ist die beschriebene Problematik immanent: Krisen in Brasilien und Lateinamerika, die Auswirkungen auf die gesamte Weltwirtschaft haben sowie die Diskussionen über die unterschiedlichen Einschätzungen des Euro.

2. Effect of Economic Shocks Under Fixed Exchange Rate Regimes

Under a flexible exchange rates system shocks such as changes in the foreign interest rate or in expectations about future exchange rates lead to a devaluation of the currency. What are their effects in a regime of fixed exchange rates? In this case the central bank has no autonomous power to change the level of money supply. However, this does not mean that the money supply is always constant under fixed rates. In fact, shocks to the variables that determine money demand (i.e. the domestic price level, domestic output or the world interest rate) will force a change in the level of money supply as monetary equilibrium is given by following equation: M = P L (Y, i*) For example, suppose that the foreign interest rat rises. The domestic interest rate will also increase thereby reducing money demand. To restore equilibrium the MS must also fall.

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But how? When i* rises, the domestic i initially remains unchanged: so agents try to sell domestic bonds and buy foreign currency in order to buy the higher yielding foreign bonds. To prevent any depreciation due to this capital outflow, the central bank intervenes and sells foreign currency. In turn, this intervention reduces the money supply and raises the domestic i up to the new higher world i*. At the equilibrium money supply is now lower (as the foreign exchange intervention has taken domestic liquidity out of circulation).

Alternatively, the central bank could achieve the same reduction in the money supply necessary to restore monetary equilibrium via an open market sale of bonds rather than a sale of foreign reserves. Both actions lead to the same result: Money supply is reduced and domestic i rises to the world level i*. While the open market operation has changed money supply, this does not mean that the monetary authority had any autonomous power. On the contrary, the increase in i* forces the central bank to engineer an equilibrium reduction in domestic money supply; this can be achieved either through a loss of foreign reserves or through an open market operation that reduces liquidity and pushes the domestic interest rate up to the new world interest rate. I this example, open market operations do affect the money supply but only because the central bank is obliged to passively intervene to adjust money supply to keep the exchange rate fixed.

These effects are presented graphically below. The increase in the foreign i* (say from

5% to 8%) initially raises the overall expected return on foreign assets, (a rightward shift of the curve representing foreign returns). Under flexible exchange rates, this change would lead to a

3% depreciation of the domestic currency from 1 to 1.03. However, under fixed rates, this depreciation has to be prevented by increasing the domestic interest rate also to a matching 8%. This is achieved by reducing money supply form MS1 to MS2. How is this endogenous money supply contraction achieved? Either the central bank intervenes to defend the currency or equivalently it performs an open market sale of government bonds that reduces liquidity in the economy. Both actions work to reduce money supply and raise the domestic interest rate.

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Another possible shock is a change in expectations about future depreciation of a fixed exchange rate. How should a monetary authority that is trying to defend a fixed parity react to a change in investors’ sentiments about the credibility of its commitment to a fixed exchange rate? Note that in normal times, when the commitment to a fixed parity is credible, the future exchange rate is expected to remain equal to the current rate as agents believe that the parity will remain unchanged.

However, a fixed rate regime does not mean that the parity will be fixed forever. For example, if the central bank runs out of reserves to defend the currency, a devaluation must occur at some point. Thus any given fixed parity may not be credible if there is some non-zero probability that the exchange rate will change in a future devaluation. So, in spite of its current fixity, changes in expectations about its future value might occur in a fixed rate regime (that is not fully credible). Such changed expectations may be due to changes in fundamental variables (high domestic inflation, large budget deficits, political risks and so on) or at times, also be caused by „irrational” changes in investor sentiments. Self-fulfilling changes in expectations may lead investors to believe that fixed parity will collapse and this will lead them to a speculative attack on a currency, even if there has been no change in the underlying fundamental determinants of the exchange rate.

Suppose that market investors start expecting a future devaluation, i.e. that the future exchange rate will be above the current fixed parity. What can a central bank do to prevent the devaluation from occurring? The answer is simple: the central bank must allow the home interest rate to rise above the world interest rate in order to prevent capital outflows induced by the expected depreciation.

Suppose that earlier agents were not expecting any depreciation, i.e. ES’ = S = 1. Initially the domestic interest rate is equal to the foreign interest rate (i = i* = 5%, say). Suppose that a shock prompts market investors to expect a 7% devaluation in the future. Now ES’ = 1.07 > S = 1 as the fixed exchange rate parity is not fully credible. This expectations shock causes a

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rightward shift of the curve representing the overall foreign return: the expected foreign return rises form 5% to 12% (5% plus the 7% expected devaluation). As mentioned above, under flexible exchange rates the change in future expectations would lead to an immediate depreciation from 1 to 1.07. However, in a fixed exchange rate regime, such a devaluation must be prevented. The only way to maintain the original exchange rate parity of 1 is to raise the domestic i form 5% to 12%. Following the shock, investors will hold the domestic assets only as long as their return equals the expected foreign returns. Since the expected devaluation has increased the expected foreign return form 5% to 12%, the domestic interest rate must rise from 5% to 12%.

As the figure shows, the increase in the domestic interest rate is achieved through an endogenous reduction in the domestic money supply form MS 1 to MS 2. As discussed in the previous case, the reduction in the MS can be achieved in two ways. Either the central bank intervenes to defend the currency which leads to a fall in the money supply; or equivalently, it performs an open market sale of government bonds that reduces liquidity in the economy.

Both act to reduce money supply and increase the interest rate at 5%. Since investors expect a

7% depreciation of the domestic currency, the expected total return to foreign assets is 12%.

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This why the domestic interest rate must now also be 12% to make sure that a devaluation does not occur.

3. Sterilized and un-Sterilized Foreign Exchange Intervention

Suppose that the currency is defended, as is usually the case, through foreign exchange intervention: the central bank sells foreign reserves to the public; this leads to a reduction in money supply and raises the interest rate. Before the intervention:

After the open market operation the money supply falls from 500 to 450:

This example of foreign exchange intervention is called „non-sterilized intervention” since the central bank allows the intervention to affect the equilibrium level of money supply in the domestic economy.

Another type of foreign exchange intervention is named „sterilized intervention”. When a central bank intervenes in the foreign exchange market, this normally leads to a reduction in money supply, and an increase in domestic interest rates. After its intervention, the central bank may want to eliminate the effects of the intervention on the money supply and interest rates. An obvious reason for wanting to sterilize is that the high interest rate might lead the economy into a recession. So how is the sterilization accomplished? Answer:

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after the foreign exchange intervention, the central bank must bring the money supply back to its previous level via an open market purchase of domestic bonds. Then the central bank balance sheet becomes:

Central banks attempt to sterilize the effects of their foreign exchange intervention in order to prevent changes in the domestic money supply and interest rates. However, such policies have negative consequences since the currency continues to be subject to devaluation pressures. To attack the root cause, one sure way is to perform non-sterilized interventions that lover MS and raise interest rates so that the incentive to dump domestic assets is eliminated. By contrast, sterilized interventions lead to further losses of foreign reserves as the original cause of the pressure on the exchange rate (higher expected foreign returns) is not countered. So, if the market is indicating that money supply should be 450 and the interest rate be 12%, an attempt to keep MS = 500 will lead to further losses of F/X reserves. After the sterilized intervention described above, reserves will further fall from 150 to 100 to push down MS to its equilibrium value of 450:

Continued use of sterilized intervention (in face of persistent exogenous depreciation pressures) will cause a continuous fall of the foreign exchange reserves. Eventually when these are all gone, no more reserves remain to defend the currency, so the fixed exchange rate collapses. Eventually a speculative attack on the currency leads to a loss of foreign exchange