The EMS Crisis in Retrospect

Eichengreen, Barry

doi:10.3386/w8035

Cited by 90 publications

(37 citation statements)

References 28 publications

(22 reference statements)

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“…The strong value of the peseta in the late 80s and early 90s was thus dependent on capital movements, which in the early 90s were mainly driven by currency speculators. This speculation prompted the EMS crisis of 1992/1993 (see Eichengreen, 2000), which forced the peseta to loose more than 20% of its value through successive depreciations (5% and 6% in September and November 1992; 8% in 1993, and 7% in 1995). Spain entered the EMS system with an exchange rate of 65 pesetas per Deutsche Mark, but pegged it at 85.1 in 1998 in view of joining the euro in January 1999.…”

Section: The Integration Processmentioning

confidence: 99%

“…Therefore, frictional growth implies that under quite plausible conditions the natural rate is not an attractor of the moving unemployment, and so the relevance of the NRU in policy making is questionable. 11 Reliance on natural rate estimates without taking into account the impact of FG may, for example, lead to a misjudgment of the unemployment effects of labour market reforms.…”

Section: Frictional Growthmentioning

confidence: 99%

“…The univariate representation (11) shows that unemployment is generated by the interplay of lagged adjustment processes and spillovers. In particular, the autoregressive coefficients φ 1 and φ 2 embody the interactions of the employment adjustment (α 1 ) and wage-price staggering (α 2 ) processes.…”

Section: Univariate Representation Of Unemploymentmentioning

confidence: 99%

“…The responses of unemployment through time (R t+j , j ≥ 0) to a one-off unit shock (impulse), occurring at period t, are described by the impulse response function (IRF) of its univariate representation (11). Unemployment persistence (σ) can be defined as the sum of its future responses, i.e.…”

Section: Impulse Response Functionsmentioning

confidence: 99%

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The Rise and Fall of Spanish Unemployment: A Chain Reaction Theory Perspective

Karanassou¹,

Sala²

2009

Path Dependency and Macroeconomics

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. The Institute for the Study of Labor (IZA) in Bonn is a local and virtual international research center and a place of communication between science, politics and business. IZA is an independent nonprofit organization supported by Deutsche Post World Net. The center is associated with the University of Bonn and offers a stimulating research environment through its international network, workshops and conferences, data service, project support, research visits and doctoral program. IZA engages in (i) original and internationally competitive research in all fields of labor economics, (ii) development of policy concepts, and (iii) dissemination of research results and concepts to the interested public. Terms of use: Documents in D I S C U S S I O N P A P E R S E R I E SIZA Discussion Papers often represent preliminary work and are circulated to encourage discussion. Citation of such a paper should account for its provisional character. A revised version may be available directly from the author. The evolution of Spanish unemployment has been quite idiosyncratic. The full employment levels of the early seventies were followed by unemployment rates that were the highest within the OECD countries in the aftermath of the oil price shocks. While unemployment was extremely persistent in most of the eighties and nineties, it experienced its sharpest decline in recent years. We investigate the determinants of this unemployment trajectory using the analytical framework of the chain reaction theory (CRT). We show that unemployment may not gravitate towards its natural rate due to frictional growth, a phenomenon that arises from the interplay of lagged adjustment processes and growing exogenous variables in a dynamic system with spillovers. The empirical analysis distinguishes four periods: (i) 1978-1985, (ii) 1986-1990, (iii) 1991-1994, (iv) 1995-2005, and finds that capital accumulation is a crucial driving force of unemployment. Thus, our theoretical and empirical results question the key role of the natural rate in policy making.JEL Classification: E22, E24, J21

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Section: The Integration Processmentioning

confidence: 99%

Section: Frictional Growthmentioning

confidence: 99%

Section: Univariate Representation Of Unemploymentmentioning

confidence: 99%

Section: Impulse Response Functionsmentioning

confidence: 99%

See 2 more Smart Citations

The Rise and Fall of Spanish Unemployment: A Chain Reaction Theory Perspective

Karanassou¹,

Sala²

2009

Path Dependency and Macroeconomics

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“…3 The set of independent variables typically includes, among others, debt and liquidity ratios, current account and government deficits, indicators of private sector imbalances, contagion, and so forth. They can be transformed into "signals" when they cross a threshold (see Kaminsky and Reinhart, 1998a, b, 1999, 2000 or used as continuous indicators, in which case probit and logit models are a popular choice. As currency crises are a relatively rare event, these models are usually estimated with a panel of emerging markets.…”

Section: Introductionmentioning

confidence: 99%

Balance of payment crises in emerging markets: how early were the ‘early’ warning signals?

Bussière

2013

Applied Economics

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in EconStor may BALANCE OF PAYMENT CRISES IN EMERGING MARKETS HOW EARLY WERE THE "EARLY" WARNING SIGNALS?by Matthieu BussièreIn 2007 all ECB publications feature a motif taken from the €20 banknote. Non-technical summary WO R K I N G PA P E R S E R I E SThe financial crises that swept emerging markets in the past decades have now been analyzed through a variety of empirical models. These models seek to statistically relate the occurrence of crises to lagged variables, which play the role of early warning indicators. Such indicators include, for instance, debt and liquidity ratios, current account and government deficits, indicators of private sector imbalances, contagion, and so forth. As financial crises are a relatively rare event, these models are usually estimated with a panel of emerging markets in order to have enough observations. In spite of important differences between each other (in terms of country coverage or specific econometric technique), most existing models share two noticeable characteristics. First, they are static models (the lagged dependent variable does not enter the equation) and second, they assume that all dependent variables enter the specification at the same lag. The aim of this paper is to test these two assumptions and to propose a framework within which they can be relaxed.The first contribution of the present paper is to introduce a dynamic specification to model financial crises. Indeed, most existing models rely on a static specification, based on the assumption that the probability of a crisis in a given country is independent of whether this country has been hit by a crisis before. However, this assumption seems very unlikely, both in the short and in the long run (in technical words, there can be state dependence). Although the proposition that the occurrence of crises in the past can influence the likelihood to observe crises in the future may appear relatively intuitive, it has not been formally tested so far. In addition, the direction of the effect is not immediately clear. In the short run, the effect could indeed run both ways. On the one hand, if a crisis translates into a large proportion of liquid investment flowing out, it is unlikely that capital outflows happen again immediately afterwards (all the funds have been moved out); in this case, the lagged dependent variable would have a negative sign. On the other hand, a crisis may indicate that a country is more vulnerable than inve...

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European Integration and Foreign Direct Investment

Zhang

2004

Aspects of Globalisation

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The EMS Crisis in Retrospect

Cited by 90 publications

References 28 publications

The Rise and Fall of Spanish Unemployment: A Chain Reaction Theory Perspective

The Rise and Fall of Spanish Unemployment: A Chain Reaction Theory Perspective

Balance of payment crises in emerging markets: how early were the ‘early’ warning signals?

European Integration and Foreign Direct Investment

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