No Credit for Transition: Efficiency wages, the Maastricht Treaty and German unemployment (2007)
Germany is generally regarded as the nominal anchor for Europe. Its participation is the sine qua non of EMU. It has been the largest net contributor to EU finances, the leading proponent of greater...
i Maximum Sustainable Government Debt in the Overlapping Generations Model* (2007)
Neil Rankin, Coventry Cv Al, Barbara Roffia, Marcus Miller, O Pereira
* We are grateful for conversations with, and comments from, Gianluca Femminis, Laurence
Corrado, Luisa, Miller, Marcus, Zhang, Lei
In this paper we show how trading rules can generate excess volatility in the exchange rate through repeated entry and exit of currency bears and bulls. This is something of a caricature: but it...
Bulls, Bears and Excess Volatility: can currency intervention help? (2007)
Corrado, Luisa, Miller, Marcus, Zhang, Lei
Asset mis-pricing may reflect investor psychology, with excess volatility arising from switches of sentiment. For a floating exchange rate where fundamentals follow a random walk, we show that excess...
Sovereign debt restructuring: the judge, the vultures and creditor rights. (2006)
What role did the US courts play in the Argentine debt swap of 2005? What implications does this have for the future of creditor rights in sovereign bond markets? The judge in the Argentine case has,...
Exchange Rate Monitoring Bands: Theory and Policy (2002)
Corrado, Luisa, Miller, Marcus, Zhang, Lei
Recent empirical research by Mark Taylor and coauthors has found evidence of hybrid dynamics for real exchange rates. While there is a random walk near equilibrium, for real exchange rates some...
Regionalisation there. He is also research fellow at
Hauer, F. R., Cook, Bradley J., Miller, Marcus, Noble, Chris, Gonser, Tom
Until recently, methods of evaluating wetland loss or degradation were either so generalized that detection of change was not quantifiable or required exhaustive research beyond the human or...
Asset Bubbles, Domino Effects and `Lifeboats': Elements of the East Asian Crisis (1998)
Hali J. Edison, Hali J. Edison, Pongsak Luangaram, Pongsak Luangaram, Marcus Miller, Marcus Miller
: Credit market imperfections have been blamed for the depth and persistence of the Great Depression in the USA. Could similar mechanisms have played a role in ending the East Asian miracle? After a...
Sovereign Default By Argentina: 'Slow Motion Train Crash' or Self-Fulfilling Crisis?
García-Fronti, Javier, Miller, Marcus, Zhang, Lei
To check hyperinflation, Argentina pegged the peso at one US dollar in 1991. This stopped inflation in its tracks: but, with the rise of the dollar against the Euro and the substantial devaluation of...
Optimal Target Zones: How an Exchange Rate Mechanism Can Improve Upon Discretion
Using Krugman's (1991) target zone model, we find an explicit, sub-game perfect solution for a central bank wishing to stabilize the exchange rate given proportional costs of intervention. We...
No Credit for Transition:Efficiency Wages, the Maastricht Treaty and German Unemployment
Germany is generally regarded as the nominal anchor for Europe. Its participation is the sine qua non of EMU. It has been the largest net contributor to EU finances, the leading proponent of greater...
Asset Bubbles, Domino Effects and 'Lifeboats': Elements of the East Asian Crisis
Hali Edison, Pongsak Luangaram, Marcus Miller
Credit market imperfections have been blamed for the depth and persistence of the Great Depression in the USA. Could similar mechanisms have played a role in ending the East Asian miracle? After a...
Financial Crisis in East Asia: Bank Runs, Asset Bubbles and Antidotes
Marcus Miller, Pongsak Luangaram
Was the East Asian crisis just a creditor panic with a mad scramble for liquidity that brought the banking system to its knees and the region's much-vaunted 'economic miracle' to a standstill? Or was...
Sovereign Liquidity Crisis: The Strategic Case for a Payments Standstill
Is sovereign borrowing so different from corporate debt that there is no need for bankruptcy- style procedures to protect debtors? With the waiver of immunity, sovereign debtors who already face...
Bargaining and Sustainability: The Argentine Debt Swap of 2005
Dhillon, Amrita, García-Fronti, Javier, Ghosal, Sayantan, Miller, Marcus
When Argentine sovereign default in December 2001 led to a collapse of the peso, the burden of dollar debt became demonstrably unsustainable. But it was not clear what restructuring was feasible, nor...
Sovereign Debt Restructuring: the Judge, the Vultures and Creditor Rights
What role did the US courts play in the Argentine debt swap of 2005? What are the implications for the future of creditor rights in sovereign bond markets? The judge in the Argentine case has, it...
Supply Shocks and Currency Crises: The Policy Dilemma Reconsidered
García-Fronti, Javier, Miller, Marcus, Zhang, Lei
The stylised facts of currency crises in emerging markets include output contraction coming hard on the heels of devaluation, with a prominent role for the adverse balance-sheet effects of liability...
Exchange Rate Bands with Price Inertia
We formulate a stochastic, rational-expectations model of exchange rate determination, in which there are random shocks to the process of sluggish price adjustment. We examine the effects of imposing...
In a continuous time model of two symmetric open economies, with a floating exchange rate, we find that the pay-off to the policy coordination depends systematically on the heterogeneity of their...
Britain's Return to Gold and Entry into the EMS: Expectations, Joining Conditions and Credibility
Miller, Marcus, Sutherland, Alan
In this paper the surprising conclusion of Smith and Smith (1990) that the prospect of Britain's return to gold in 1925 had the effect of weakening sterling is subjected to critical analysis. It is...
The `Walters' Critique of the EMS: A Case of Inconsistent Expectations
Miller, Marcus, Sutherland, Alan
Alan Walters has suggested that the European Monetary System will prove dynamically unstable when capital controls are removed. The argument is analysed within a model that includes overlapping...
Exchange Rate Monitoring Bands: Theory and Policy
Luisa Corrado, Marcus Miller, Lei Zhang
Recent empirical research by Mark Taylor and coauthors has found evidence of hybrid dynamics for the real exchange rate. While there is a random walk near equilibrium, for real exchange rates some...
Capital Flows, Interest Rates and Precautionary Behaviour: a model of Global Imbalances
A dynamic stochastic model of global equilibrium, where countries outside the US face higher risk than the US itself, predicts current account surpluses in the RoW and US deficits. With Loss...
'Irrational exuberance' and capital flows for the US New Economy: a simple global model
Marcus Miller, Olli Castrén, Lei Zhang
In a stylized and analytically tractable model of the global economy, we first calculate the Pareto improvement when a country experiencing a favourable supply side shock consumes more against...
Bulls, bears and excess volatility: can currency intervention help?
Luisa Corrado, Marcus Miller, Lei Zhang
Asset mis-pricing may reflect investor psychology; and excess volatility can arise from switches of sentiment. For a floating exchange rate where fundamentals follow a random walk, we show that...
Monitoring Bands and Monitoring Rules: how currency intervention can change market composition
Luisa Corrado, Marcus Miller, Lei Zhang
In this paper we show how trading rules can generate excess volatility in the exchange rate through repeated entry and exit of currency "bears" and "bulls". This is something of a caricature: but it...
Inflation-Adjusting the Public Sector Financial Deficit : Measurement and Implications for Policy.
Current macroeconomic policy differs from conventional Keynesian demand management in two major respects, namely in the announced objectives of policy and in the means chosen to pursue them. Early in...
Real Exchange Rate Overshooting and the Output Cost of Bringing Down Inflation
Buiter, Willem H, Miller, Marcus
The proposition that under a floating exchange rate regime restrictive monetary policy can lead to substantial "overshooting" of the nominal and real exchange rate is now accepted fairly widely. The...
The Thatcher Experiment: The First Two Years
William H. Buiter, Marcus Miller
macroeconomics, Thatcher
Changing the Rules: Economic Consequences of the Thatcher Regime
Willem H. Buiter, Marcus Miller
macroeconomics, Thatcher
Fear and Market Failure: Global Imbalances and 'Self-insurance'
Two key issues are examined in an integrated framework: the emergence of global imbalances and the precautionary motive for accumulating reserves. Standard models of general equilibrium would predict...
Co-ordination Failure, Moral Hazard and Sovereign Bankruptcy Procedures
Sayantan Ghosal, Marcus Miller
We study a model of sovereign debt crisis that combines problems of creditor co-ordination and debtor moral hazard. In the face of sovereign default, the need to give appropriate incentives to the...
Asset Bubbles, Leverage and 'Lifeboats': Elements of the East Asian Crisis.
Edison, Hali J, Luangaram, Pongsak, Miller, Marcus
Collapsing credit markets have been blamed for the depth and persistence of the Great Depression in the United States. Could similar mechanisms have played a role in ending the East Asian economic...
Sovereign Liquidity Crises: The Strategic Case for a Payments Standstill.
Is sovereign borrowing so different from corporate debt that there is no need for bankruptcy-style procedures to protect debtors? With the waiver of immunity, sovereign debtors who already face...
Shareholders and Stakeholders: Human Capital and Industry Equilibrium.
Miller, Marcus, Ippolito, Roberto, Zhang, Lei
Producing high technology output and supplying sophisticated services often involves costly investment in industry-specific skills. But the threat of poaching means that it is the individual...
Hyperinflation and Stabilisation: Cagan Revisited.
Using a variant of the Cagan (1956) model with rational expectations, this paper shows that expected stabilization can result in a budget deficit in excess of the maximum inflation tax. A cap on the...
Oil Price Hikes and Development Triggers in Peace and War.
The theory of irreversible investment predicts that development of an oil field should take place when a unique 'price trigger' is passed. At the start of the 1990/91 Gulf War, however, oil prices...
Learning and Inflation Convergence in the ERM.
Driffill, John, Miller, Marcus
This paper develops a model where agents learn about the probability of devaluations in a fixed exchange rate regim e. The true probability of devaluation is assumed to be low (or zero) b ut agents...
Exchange Rate Bands with Price Inertia.
The authors formulate a stochastic rational-expectations model of exchange-rate determination in which there are random shocks to the process of sluggish price adjustment. They examine the effects of...
Learning to Forget? Contagion and Political Risk in Brazil
Zhang, Lei, Marcus Miller, Kannika Thampanishvong
We examine whether Brazilian sovereign spreads of over 20 percent in 2002 could be due to contagion from Argentina or to domestic politics, or both. Treating unilateral debt restructuring as a policy...
The "Walters Critique" of the EMS--A Case of Inconsistent Expectations?
Miller, Marcus, Sutherland, Alan
Alan Walters has suggested that the European Monetary System will prove dynamically unstable when capital controls are removed. The argument is analyzed within a model where overlapping contracts...
Designing Monetary Policy When Unemployment Persists.
Lockwood, Ben, Miller, Marcus, Zhang, Lei
This paper investigates how unemployment persistence affects the optimal delegation of monetary policy to an independent central banker (CB). Two opposing forces are shown to be at work: with more...
Debt Restructuring and Economic Recovery: Analysing the Argentine Swap
Amrita Dhillon, Javier García-Fronti, Sayantan Ghosal, Marcus Miller
When Argentine sovereign default in December 2001 led to a collapse of the peso, the burden of dollar debt became demonstrably unsustainable. But it was not clear what restructuring was feasible, nor...
No Credit for Transition: European Institutions and German Unemployment
The Stability and Growth Pact, adopted by members of the European Union, imposes tight limits on government deficits. But since the collapse of Communism, Europe has been faced with the problems of...
The Thatcher Experiment: The First Two Years
William H. Buiter, Marcus Miller
macroeconomics, Thatcher
Changing the Rules: Economic Consequences of the Thatcher Regime
Willem H. Buiter, Marcus Miller
macroeconomics, Thatcher
Punishment Without Crime? Prison as a Worker-Discipline Device
Miller, Marcus, Smith, Jennifer C
An ‘efficiency wage’ model developed for Western economies is reinterpreted for Soviet Russia assuming that it was the Gulag not unemployment that acted as a ‘worker-discipline device’....
UK External Imbalances and the Sterling: Are they on a Sustainable Path?
Eleni Iliopulos, Marcus Miller
International macroeconomics, Debt dynamics, Open economy, Real exchange rate dynamics, F31, F32, F41,
Exchange Rate Monitoring Bands: Theory and Policy
Corrado, L., Marcus Miller, Lei Zhang
Recent empirical research by Mark Taylor and coauthors has found evidence of hybrid dynamics for real exchange rates. While there is a random walk near equilibrium, for real exchange rates some...
Capital Flows, Interest Rates and Precautionary Behaviour: a model of "global imbalances"
A dynamic stochastic model of global equilibrium, where countries outside the US face higher risk than the US itself, predicts current account surpluses in the RoW and US deficits. With Loss...
Sovereign Debt Restructuring: The Judge, the Vultures and Creditor Rights
What role did the US courts play in the Argentine debt swap of 2005? What implications does this have for the future of creditor rights in sovereign bond markets? The Judge in the Argentine case has,...
Capital flows and the US ‘New Economy’ - consumption smoothing and risk exposure
Marcus Miller, Olli Castrén, Lei Zhang
In an analytically tractable model of the global economy, we calculate the Pareto improvement where a country experiencing a favourable supply side shock consumes more against expected future output...
Fear and Market Failure: Global Imbalances and “Self-Insurance”
This paper proposes an integrated framework to analyze jointly two key issues: the emergence of global imbalances and the precautionary motive for accumulating reserves. Standard models of general...
Moral Hazard and the US Stock Market: Has Mr. Greenspan Created a Bubble?
Marcus Miller, Paul Weller, Lei Zhang
No abstract.
Creditor Panic, Asset Bubbles and Sharks: Three Views of the Asian Crisis
How are we to understand the East Asian crisis? There are two popular explanations: first that it was just like a nineteenth century British bank panic, calling for prompt action by a 'lender of last...
The International Monetary System: An Analysis of Alternative Regimes
Miller, Marcus, Williamson, John
This is an exercise in the positive economics of alternative monetary regimes. The behaviour of output and prices is compared using a stochastic specification which allows asymptotic variances to be...
Solving Stochastic Saddlepoint Systems: A Qualitative Treatment with Economic Applications
We examine the effect of introducing stochastic shocks into a linear rational expectations model with saddlepoint dynamics generated by a forward looking asset price. We derive the fundamental...
Sovereign Liquidity Crises: the Strategic Case for a Payments Standstill
Is sovereign debt so different from corporate debt that there is no need for bankruptcy procedures to handle potential defaults? The basic tools of finance seem to confirm that, without water-tight...
No Credit for Transition: The Maastricht Treaty and German Unemployment
Driffill, John, Miller, Marcus
Germany is generally regarded as the nominal anchor for Europe. Its participation is the sine qua non of EMU. It has been the largest net contributor to EU finances, the leading proponent of greater...
Exchange Rate Monitoring Bands: Theory and Policy
Corrado, Luisa, Miller, Marcus, Zhang, Lei
Recent empirical research by Mark Taylor and co-authors has found evidence of hybrid dynamics for real exchange rates. While there is a random walk near equilibrium, for real exchange rates some...
World Finance and the US 'New Economy': Risk Sharing and Risk Exposure
The promising prospect of a ‘New Economy’ in the US attracted substantial equity inflows in the late 1990s, helping to finance the country’s burgeoning current account deficit. After peaking in...
Exchange rate monitoring bands: theory and practice
Corrado, Luisa, Marcus Miller, Lei Zhang
Recent empirical research has found evidence of hybrid dynamics for the real exchange rate. While there is a random walk near equilibrium, for real exchange rates some distance from equilibrium there...
Moral Hazard and the US Stock Market: Analysing the "Greenspan Put"
Marcus Miller, Paul Weller, Lei Zhang
When the risk premium in the US stock market fell substantially, Shiller (2000) attributed this to a bubble driven by psychological factors. An alternative explanation is that the observed risk...
Speculative Anticipations of Sterling's Return to Gold: Was Keynes Wrong?
Miller, Marcus, Sutherland, Alan
The view held by Keynes that there was a speculative appreciation of sterling prior to its return to the gold standard, has been challenged by Gregor Smith and Todd Smith, who argue that expectations...
Inflation Convergence with Realignments in a Two-Speed Europe.
Lambertini, Luisa, Miller, Marcus, Sutherland, Alan
In the first decade of its existence, the European Monetary System passed through three phases of realignments: full accommodation, partial accommodation, and zero accommodation of inflation...
The medium term financial strategy: an experiment in co-ordinating monetary and fiscal policy
In the budget of 1980 the current administration launched the Medium Term Financial Strategy (MTFS), a four year plan designed primarily to reduce inflation but also to generate economic growth, see...
Hyperinflation and stabilization: Cagan revisited
Europe, Eastern ; Inflation (Finance)
Asset bubbles, domino effects and 'lifeboats': elements of the East Asian crisis
Hali J. Edison, Pongsak Luangaram, Marcus Miller
Credit market imperfections have been blamed for the depth and persistence of the Great Depression in the USA. Could similar mechanisms have played a role in ending the East Asian miracle? After a...
Dynamic Games and the Time Inconsistency of Optimal Policy in Open Economies
In this paper the Maximum Principle is used to derive optimal policies for linear-quadratic, continuous-time economic systems where there may be more than one policy-maker and where the private...
Exchange Rate Bands and Realignments in a Stationary Stochastic Setting
The extent which exchange rate management can coexist with an independent monetary policy is examined in the context of a model with exchange rate bands. Using a Dornbusch model in which stochastic...
Currency Bonds, Target Zones and Cash Limits: Thresholds for Monetary and Fiscal Policy
Exchange rate behavior is analyzed in the context of a stochastic rational expectations model in which there are random shocks to the price setting mechanism and in which the authorities choose to...
Inflation Convergence with Realignments in a Two-Speed Europe
Lambertini, Luisa, Miller, Marcus, Sutherland, Alan
In the first decade of its existence the EMS passed through three phases of realignments: full accommodation, partial accommodation and zero accommodation of inflation differentials. To what extent,...
The desire to avoid speculative runs on currencies appears to be one of the main reasons leading policy-makers to impose currency bands, but the standard analysis of target zones rules out any...
Hyperinflation and Stabilization: Cagan Revisited
Using a variant of the Cagan model with rational expectations, this paper shows that expected stabilization can result in a budget deficit in excess of the maximum inflation tax. A cap on the deficit...
Shareholders and Stakeholders: Human Capital and Industry Equilibrium
Ippolito, Roberto, Miller, Marcus, Zhang, Lei
Producing high technology output and supplying sophisticated services often involves costly investment in industry-specific skills. But the threat of poaching means that it is the individual...
Asset Bubbles, Domino Effects and 'Lifeboats': Elements of the East Asian Crisis
Edison, Hali J, Luangaram, Pongsak, Miller, Marcus
Credit market imperfections have been blamed for the depth and persistence of the Great Depression in the US. Could similar mechanisms have played a role in ending the East Asian miracle? After a...
Moral Hazard and the US Stock Market: The Idea of a 'Greenspan Put'
Miller, Marcus, Weller, Paul, Zhang, Lei
The risk premium in the US stock market has fallen far below its historic level, which Shiller (2000) attributes to a bubble driven by psychological factors. As an alternative explanation, we point...
Coordination Failure, Moral Hazard and Sovereign Bankruptcy Procedures
Ghosal, Sayantan, Miller, Marcus
We study a model of sovereign debt crisis that combines problems of creditor co-ordination and debtor moral hazard. Solving the sovereign debtor’s incentives leads to excessive ‘rollover...
Learning to Forget? Contagion and Political Risk in Brazil
Miller, Marcus, Thampanishvong, Kannika, Zhang, Lei
We examine whether Brazilian sovereign spreads of over 20% in 2002 could be due to contagion from Argentina or to domestic politics, or both. Treating unilateral debt restructuring as a policy...
Credit Crunch and Keynesian Contraction: Argentina in Crisis
García-Fronti, Javier, Miller, Marcus, Zhang, Lei
The Argentine convertibility regime, where the peso was fixed at parity with the US dollar, ended with a ‘twin crisis’ – a tripling in the price of a dollar and a protracted closure of the...
Fries, Steven, Miller, Marcus, Perraudin, William
This article shows (1) how entry and exit of firms in a competitive industry affect the valuation of securities and optimal capital structure, and (2) how, given a trade-off between tax advantages...
Contacts, Credibility and Common Knowledge - Their Influence on Inflation Convergence
Marcus Miller, Alan Sutherland
Inflation , Currency pegs , Economic models ,
CURRENCY BANDS, TARGET ZONES, AND CASH LIMITS: THRESHOLDS FOR MONETARY AND FISCAL POLICY
Target zones , Monetary policy , Fiscal policy , Exchange rates , Economic models ,
Global Financial Crises - Institutions and Incentives
Manmohan S. Kumar, Paul R. Masson, Marcus Miller
Financial crisis , International monetary reform ,
Supply shocks and currency crises : the policy dilemma reconsidered
García-Fronti, Javier, Miller, Marcus, Zhang, Lei
The stylised facts of currency crises in emerging markets include output contraction coming hard on the heels of devaluation, with a prominent role for the adverse balance-sheet effects of liability...
Sovereign debt restructuring : the Judge, the vultures and creditor rights
What role did the US courts play in the Argentine debt swap of 2005? What implications does this have for the future of creditor rights in sovereign bond markets? The judge in the Argentine case has,...
Dynamic Games and the Time Inconsistency of Optimal Policy in Open Economies
It has been argued that the Bretton Woods system (of pegged but adjustable exchange rates) set up after World War II was designed specifically to prevent the manipulation of exchange rates in pursuit...
Buiter, William H, Miller, Marcus
A model of Dornbusch is adapted to analyse the consequences for output and competitiveness of certain aspects of the U.K. government's medium term financial strategy and some other policy actions....
Financial Liberalisation, Asset Prices and Exchange Rates
This paper is one of four in this Working Paper Series, focusing on financial liberalisation, along with those of Kupiec, Driscoll and Blundell-Wignall and Browne. It surveys recent work, both...
Real Exchange Rate Overshooting and the Output Cost of Bringing Down Inflation: Some Further Results
THE ILLUSION OF STABILITY-LOW INFLATION IN A BUBBLE ECONOMY
MARCUS MILLER, ISHITA MOHANTY, LEI ZHANG
Econometric studies show that changes in real house prices are strongly autocorrelated in the UK, giving rise to prolonged departures from equilibrium. What happens when arbitrage is 'broken' and...
Exchange Rate Targets and Currency Bands
Research programmes in economics usually emerge from the intersection between a new analytical approach and a real economic problem. In the last few years, such a programme has emerged in...
Giavazzi,Francesco, Micossi,Stefano, Miller,Marcus
The European Monetary System (EMS) has, since its inception in 1979, provided a fascinating example of policy co-ordination in practice. As concern about exchange-rate instability and global economic...
Agénor,Pierre-Richard, Miller,Marcus, Vines,David, Weber,Axel
Presents the first theoretical analysis of the Asian financial crisis and draws out the general lessons of an event whose potential long term effects have been likened to those of the Crash of 1929....
Agénor,Pierre-Richard, Miller,Marcus, Vines,David, Weber,Axel
Presents the first theoretical analysis of the Asian financial crisis and draws out the general lessons of an event whose potential long term effects have been likened to those of the Crash of 1929....
Leverage and Asset Bubbles: Averting Armageddon with Chapter 11?
Miller, Marcus, Stiglitz, Joseph E
An iconic model with high leverage and overvalued collateral assets is used to illustrate the amplification mechanism driving asset prices to ‘overshoot’ equilibrium when an asset bubble bursts -...