★ Krugman: currency crisis Seer

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★ Krugman: currency crisis Seer Powered By Docstoc
					★ Krugman: currency crisis Seer
?Paul Krugman Resume:
1974, graduated from Yale University.
In 1977, received a Ph.D. Massachusetts Institute of Technology, and the same year as
the Princeton University professor of economics and international affairs.
From 1982 to 1983, served as White House economic adviser.
1991, was set up by the American Economic Association, "Clark
Since 1999, in "The New York Times" columnist on the article.
In 2008, he received the Nobel Prize in Economics.
Last month, global financial market turmoil to hit three months ago, Wall Street
almost feel insecure. And far across the ocean's Nobel Prize award, but also
beautiful ending, the Royal Swedish Academy of Sciences Nobel Committee
ultimately decided to award the 2008 Nobel Prize in economics U.S. economist Paul
Scholars have criticized the country's regulatory policy of laissez-faire
Greenspan occasion, as a representative of the new generation of free school of
economics, Krugman's election has naturally aroused controversy in the
media. However, in terms of academic research, Krugman's theoretical
contributions to this tripod well-deserved title anyway.
In the business model analysis and field location of economic activity, Krugman
innovation of the famous Ricardian theory of comparative advantage, and in the
international financial sector is unprecedented build a theoretical model of currency
crises. A time when the global financial crisis raging, re-learn and perfect this theory
has a unique sense of the times.
In 1979, Krugman to small open economy framework for the analysis to a fixed
exchange rate system for the analysis, and established a first-generation models of
currency crises, also known as the Krugman model. In this model, Krugman clearly
explain the deterioration of the economic fundamentals of the operating mechanism
under the currency crisis, he believes that a country's financial, monetary
policy and fixed exchange rate regime is caused by the contradictions underlying
causes of the crisis. One country to the policy of credit expansion and fiscal deficit
will reach early general purpose of stimulating economic growth, economic growth
will also continue to attract foreign capital inflows, a part of them being used to
expand imports, part of the country's foreign exchange reserves increased ,
when the domestic credit expansion and foreign investment inflows because of the
credit expansion of the double sustained period of time, will enable the economy to
abnormal development, lead to a false prosperity of the bubble economy and the
economic fundamentals are deteriorating current account reversal, of capital
slowdown in foreign capital inflow under the project, and even began to drain, leading
to balance of payments deficit, reduce foreign exchange reserves. When the foreign
exchange reserves depleted, the government had announced to abandon the fixed
exchange rate system, let the currency depreciate over the market.
The first generation of currency crisis theory in the late 70s, early 80s, and currency
crises in Latin America, the Russian currency crisis of 1998 had been fully explained.
90 years of the 20th century, Latin America, there is widespread financial
liberalization, including privatization of state-owned banks, and actively introduce
foreign banks. Financial liberalization, the promotion of economic growth, but
excessive expansion of credit, regulatory and accounting system deficiencies relative
backwardness became the fuse the crisis. The 1998 Russian financial crisis and the
outbreak of the credit expansion of the blind. 1997 -1 998 period, Russia broke out a
total of three major financial turmoil, the most fundamental reason is that long-term
Government treasury bonds issued domestically, foreign large-scale debt, in 1998, a
large number of debts have expired, the Government had announced financial debt
crisis, led to the public and investors in the Government's "crisis
of confidence" from the bond market, the stock market withdrawal of
funds pour into the currency markets, causing a serious imbalance between foreign
exchange supply and demand, directly caused the ruble crisis.
In 1994, economist Obstfeld (Maurice Obstfeld) in Krugman's first
generation models of currency crises based on the introduction of the expected
behavior of the public variables, constitute the theoretical model of second-generation
currency crisis. Theory of second-generation currency crisis with particular emphasis
on the time of the currency crisis between the government and speculators expect the
process of the game. The theory is that, even if no further deterioration in
macroeconomic fundamentals, a sudden change in market expectations, so that the
formation of devaluation is widely anticipated, it may trigger a currency crisis.
The second generation of theory to practice, the best example is the 1992 European
Monetary System crisis. August 1992, Soros margin of 5% means a large number of
short-selling the equivalent to 70 billion pounds, and through publicity campaigns to
attract a large number of international speculators, the British government tried to
intervene in the pound, but expected to increase the depreciation of speculators and to
intensify the impact of the currency launch. England and Germany to spend over 15
billion U.S. dollars the central bank buy back pounds, the Bank of England was
forced to raise interest rates twice that, but did not stop this vicious circle, ultimately
making the British to abandon the fixed exchange rate, from the European monetary
1997 Asian financial crisis, currency crisis theory is facing new challenges. Original
currency crisis theory can not explain the operation mechanism of the crisis, currency
crisis theory has been a wider range of amendments, the formation of a
third-generation currency crisis theory. Krugman published a series of articles in the
following, we present the concept of financial excess (financial excess). 90 Asian
countries in the context of free capital flows, countries have the funds to invest in
financial institutions, securities and real estate markets, triggered a financial bubble,
exacerbating the vulnerability of the entire financial system, leading to systemic risk
throughout the banking system. In the third generation of currency crisis theories,
some of the behavioral finance research to the "moral hazard",
"herd behavior" and other concepts are embraced, has aroused
extensive attention.
In our high degree of financial liberalization today, Krugman's idea of a
currency crisis is more important practical value. From the "two
rooms" to Lehman Brothers managed a high profile crashing down, from
700 billion U.S. dollars of the rescue program passed to the joint European
redemption operations, the Wall Street blew the financial turmoil spread across the
Atlantic has been fully and around the world , also we are experiencing unprecedented
Highly developed financial markets promote the rapid development of the real
economy as well as latent crises. With the global "financial
disintermediation" of development, the bank will tend to shrink the role of
the media, rely on market-based financing has become the future trend of financial
development, and economic globalization, the more horizontal linkages between
countries closely changes in the financial markets of a country again to imagine
beyond the speed of transmission to other countries, especially in high-speed flows of
capital financial system, the more necessary to strengthen a sense of crisis, a sound
risk control system. Crisis in Iceland and other countries round the painful experience
of the financial system in addition to its business model problems, all details of capital
flows, the terrible consequences guard.
Reflections on China, in this economic crisis due to loss of small more relatively
"backward" in the level of financial development and strong
government firewall. This powerful firewall for a becoming more and more
international financial markets, is also a protection constraints, the Government can
not always be the last pay financial institutions were. Fortis Ping An investment from
the huge Fukui to CITIC Securities on Bear Stearns's a risky move all
shows that we should lack the experience in the international financial environment.
Along with the rapid development of direct financing market, capital will gradually
open the market participation of the subject will fundamentally change the role of the
government to complete the transformation, in the new rapid response to historical
circumstances, and how to strengthen the international financial sector cooperation
and establish a sound risk control system also should be thinking of our current

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