Working Papers

The objective of this paper is to examine the impact of unconventional monetary policy measures adopted in developed countries (the US, UK, Euro Area and Japan) on developing economies (Brazil, China, India and Russia). First, we analyse the domestic and cross-border financial market impact of unconventional monetary policy announcements by central banks, using a series of event studies. We find that quantitative easing (QE) by the FED, BoE, ECB and BoJ influenced long term yields, equity prices, and possibly exchange rates both in the developed and developing countries (for example we find that QE resulted in decreases in long term yields by about 125 basis points in the US, about 100…

This paper examines the distributional effects of fiscal austerity. Using episodes of fiscal consolidation measures for a sample of 17 OECD countries over the period 1978-2009, we find that fiscal consolidation episodes have typically led to a significant and long-lasting increase in inequality. Tax-based consolidation episodes tend to have a larger and more persistent effect on inequality than spendingbased consolidations. The evidence also shows that while fiscal consolidations have typically led to a fall in wage income, they have not had a significant effect on profit and rent income.

This paper argues that SDRs should become a more relevant instrument of international monetary cooperation. This requires transforming them into a pure reserve asset and the IMF into a fully SDR-funded institution. SDRs would then be issued counter-cyclically and treated as deposits of countries in the IMF, which can in turn lend to countries. This approach would correct basic deficiencies of the current global monetary system. Complementary reforms include a substitution account for an orderly and smooth transition from major reserve currencies to SDRs, and the issuance of SDR-denominated bonds as an alternative to other major short-term assets.

This paper assesses the effects of combining fiscal austerity with flexibilization policies aimed at reducing labour costs and increasing competitiveness. Core to our analysis is a global perspective where the aggregation problem is fully taken into account. We derive a stylized macroeconomic framework of distributive and demand dynamics. We show that even in export-led regimes, after considering global feedbacks, flexibilization policies do not lead to higher income and employment. Rather, the end result is contractionary. Over time, the world economy is essentially wage-led and responds positively to coordinated Keynesian stimuli.

Decomposition of real commodity prices suggests four super-cycles during 1865-2009 ranging between 30-40 years with amplitudes 20-40 percent higher or lower than the long-run trend. Non-oil price super-cycles follow world GDP, indicating they are essentially demand-determined; causality runs in the opposite direction for oil prices. The mean of each super-cycle of non-oil commodities is generally lower than for the previous cycle, supporting the Prebisch-Singer hypothesis. Tropical agriculture experienced the strongest and steepest long-term downward trend through the twentieth century, followed by non-tropical agriculture and metals, while real oil prices experienced a long-term upward…