Paul Robert Masson

Weatherstone Consulting

We examine the relative ability of simple inflation targeting (IT) and price level targeting (PLT) monetary policy rules to minimize both inflation variability and business cycle fluctuations in Canada for shocks that have important consequences for global commodity prices. We find that commodities can play a key role in affecting the relative meri...

Since the 1980s, Ontario’s wine industry has experienced rapid growth in the number of wineries, quality of wines, and amount of wine produced. However, it still operates in an environment for wine retailing that is a legacy of the prohibition era, and is subject to constraints that were built into the 1986 Free Trade Agreement with the United Stat...

Executive Summary The new American administration has indicated its intention to make radical changes to US policies what would shake up the postwar world order. African countries should consider carefully how they can mitigate unfavorable effects and take advantage of potential opportunities.

The lack of competition in Ontario’s system for alcoholic beverage retailing causes higher prices for consumers and foregone government revenue. A major component of the lack of competition is the disadvantage faced by small Ontario wineries and breweries relative to the larger producers. Three large brewers own The Beer Store, which dominates reta...

This paper proposes a quantitative assessment of the welfare effects arising from the Common Monetary Area (CMA) and an array of broader groupings among Southern African Development Community (SADC) countries. Model simulations suggest that (i) participating in the CMA benefits all members; (ii) joining the CMA individually is beneficial for all SA...

Interest rates in Canada and in many other countries have not been so low since the Great Depression. When taking into account inflation, short-term interest rates are negative in most developed countries, including Canada where the overnight rate currently stands at 1 percent in nominal terms. These historically low rates were initially a response...

This chapter reviews the history of currency regimes and the years leading up to the breakdown of Bretton Woods, and examines the experience post-1973. It considers whether the opportunity of strengthening the rules of the game of the international monetary system is greater now that the financial crisis has exposed fault lines in the current syste...

Cet article propose un modèle de banque centrale dépendante qui internalise la contrainte budgétaire du gouvernement afin d’examiner la composition optimale de la zone euro. L’objectif est de stimuler le produit agrégé, mais aussi de fournir un financement monétaire aux gouvernements. Ne pouvant répondre aux politiques de premier choix, la banque c...

This paper proposes a quantitative assessment of the welfare effects arising from the Common Monetary Area (CMA) and an array of broader grouping among Southern African Development Community (SADC) countries. Model simulations suggest that (i) participating in the CMA benefits all members; (ii) joining the CMA individually is beneficial for all SAD...

A model of a dependent central bank that internalizes the government’s budget constraint is used to examine the optimal composition of the euro zone. The model embodies the desire to stimulate output and to provide monetary financing to governments. Unable to pre-commit to first-best policies, the central bank produces excess inflation — a tendency...

The East African Community (EAC) has fast-tracked its plans to create a single currency for the five countries making up the region, and hopes to conclude negotiations on a monetary union protocol by the end of 2012. While the benefits of lower transactions costs from a common currency may be significant, countries will also lose the ability to use...

Regional currency areas and the use of foreign currencies Monetary and Economic Department May 2003Papers in this volume were prepared for a meeting of senior officials from central banks held at the Bank for International Settlements in September 2002. The views expressed are those of the authors and do not necessarily reflect the views of the BIS...

Like the gold standard, price-level targeting (PT) involves not letting past deviations of inflation be bygones; both regimes return the price level (or price of gold) to its target. The experience of suspension of the gold standard in World War I and resumption in the 1920s (for some countries at a different parity) is reviewed. It suggests that,...

This paper develops a full-fledged cost-benefit analysis of monetary integration, and applies it to the currency unions actively pursued in Africa. The benefits of monetary union come from a more credible monetary policy, while the costs derive from real shock asymmetries and fiscal disparities. The model is calibrated using African data. Simulatio...

We detail several models that help to understand the prospects for cooperation on regulatory reform in the current crisis. A first model, which focuses on parameter uncertainty, shows that gains from coordination increase as the global economy becomes less certain, because coordination allows policymakers to control for the variability of spillover...

We detail several models that help to understand the prospects for cooperation on regulatory reform in the current crisis. A first model, which focuses on parameter uncertainty, shows that gains from coordination increase as the global economy becomes less certain, because coordination allows policymakers to control for the variability of spillover...

Backed by rapid economic growth, growing financial clout, and a newfound sense of assertiveness in recent years, the BRIC countries - Brazil, Russia, India, and China - are a driving force behind an incipient transformation of the world economy away from a US-dominated system toward a multipolar one in which developing countries will have a major s...

The current financial crisis has highlighted the danger that declines in confidence can have a self-fulfilling effect on economic activity. In this paper, the authors consider ways of measuring investor and consumer confidence, and try to explain the evolution of confidence using measures of financial volatility, investment performance, macroeconom...

Despite having the world's largest GDP when measured in terms of purchasing-power parities, the third-largest share in world exports, and the world's largest foreign exchange reserves, China has only a minor role in the global financial system. Its banks have a modest international presence; China's currency, the renminbi, is virtually not used out...

Using estimates that currency unions double trade, we quantify the welfare effects of forming currency unions for the African regional economic communities and for the African Union as a whole. The potential increase in trade is shown to be small, and much less than that resulting from the adoption of the euro. Allowing for increased African trade...

US interest rate policy is shown to have a significant influence on emerging market bond spreads, but it is important to allow for non-linearities: US interest rates affect secondary market spreads differently, depending on countries' debt levels. Moderate debtors suffer little impact from an increase in US interest rates, while a country close to...

More than eight years after the introduction of the euro, impacts on developing countries have been relatively modest. Overall, the euro has become much more important in debt issuance than in official foreign exchange reserve holdings. The former has benefited from the creation of a large set of investors for which the euro is the home currency, w...

China has emerged as a major power in the world economy, so it seems natural to consider whether its currency will also have a major role. At present the renminbi is not used internationally. We look at the factors that contribute to the international use of currencies, and focus on the aspects of China's financial system that would have to change...

As in many other developing economies, establishing a low inflation environment has been a challenge in Nigeria; and ways to improve the formulation and implementation of monetary policy have been at the forefront of the policy debate. An array of institutional reforms expected to foster the credibility of a commitment to price stability could pote...

More than eight years after the introduction of the euro, impacts on developing countries have been relatively modest. Overall, the euro has become much more important in debt issuance than in official foreign exchange reserve holdings. The former has benefited from the creation of a large set of investors for which the euro is the home currency, w...

Many are currently questioning the IMF's relevance, due to the shrinkage of its loan portfolio and concerns about its legitimacy, especially in Asia. Countries do not want to borrow from the Fund so as not to face the intrusive policy conditionality associated with its lending, and at the same time the absence of crises makes such borrowing unneces...

This book provides a good basis for a graduate course in international finance. It also serves as a reference source for professional economists. Though other good surveys and handbooks are available, they are too extensive to serve as a graduate textbook. In many cases they are outdated, as there has been an explosion of work on the issues over th...

This book provides a good basis for a graduate course in international finance. It also serves as a reference source for professional economists. Though other good surveys and handbooks are available, they are too extensive to serve as a graduate textbook. In many cases they are outdated, as there has been an explosion of work on the issues over th...

Africa has important initiatives to build regional currency areas and ultimately a single African currency. Calculations using a calibrated model show that the proposed monetary unions are unlikely to yield net economic benefits for all countries, suggesting that all-inclusive monetary unions are not incentive-compatible—even if trade doubles as a...

We offer evidence in this paper that US interest rate policy has an important influence in the determination of credit spreads on emerging market bonds over US benchmark treasuries, and therefore on their cost of capital. Our analysis improves upon the existing literature and understanding, by addressing the dynamics of market expectations in shapi...

We develop a model in which governments’ financing needs exceed the socially optimal level because public resources are diverted to serve the narrow interests of the group in power. From a social welfare perspective, this results in undue pressure on the central bank to extract seigniorage. Monetary policy also suffers from an expansive bias, owing...

This paper studies the transition between exchange rate regimes using a Markov chain model with time-varying transition probabilities. The probabilities are parameterized as nonlinear functions of variables suggested by the currency crisis and optimal currency area literature. Results using annual data indicate that inflation and, to a lesser exten...

Should Africa work toward a single currency? Can the European Union be a model for African nations? The goal of a common African currency has long been a pillar of African unity, a symbol of the strength that its backers hope will emerge from efforts to integrate the continent. A common currency could increase economic stability, provide greater in...

A major drawback to hinging the goal of a single African currency on first creating new monetary unions spanning predefined regions is that either not all countries will be willing to join, or the countries in each region may have little incentive to adapt their policies to some standard of best practice because it is taken for granted that no coun...

A simple model of a portfolio allocation between mature and emerging markets is specified. The representative-agent, rational expectations version of the model has an unlimited number of equilibria, providing no reason to expect that heterogeneous agents would all coordinate on one or another equilibrium. Therefore, the model is simulated with hete...

A simple model of a portfolio allocation between mature and emerging markets is specified. The representative-agent, rational expectations version of the model has an unlimited number of equilibria, providing no reason to expect that heterogeneous agents would all coordinate on one or another equilibrium. Therefore, the model is simulated with hete...

153 In 2003, Canada's currency appreciated by 20 percent against the US dollar. Given the lags in the adjustment of trade to relative price changes, what are the prospects for Canada's current account position? Will Canada, as the United States' largest trading partner, contribute substantially to reestab-lishing equilibrium in the US external acco...

We examine the statistical properties of daily changes in emerging market bond spreads over US treasuries, and simulate an agent-based model to attempt to replicate those properties. The actual data indicate that changes in spreads: 1) are definitely not normally distributed, exhibiting much fatter tails; 2) are serially correlated, suggesting devi...

The Argentina crisis will not provide an opportunity to make a break with the past and take the IMF in the new directions that director Horst Kohler has enunciated, Instead, the fund. needs to accept that the humanitarian crisis in Argentina demands quick disbursement with relaxed conditionality.

Drawing on the recent literature and experience of monetary integration in Europe, the paper examines the rationale for establishing regional currency unions in western Africa. Despite dramatic economic, political and historical differences between the two regions, the analysis indicates that monetary unification might well be beneficial for a numb...

This paper compares different nominal anchors in the case of a fixed exchange rate regime for the future single regional currency of the Economic Community of the West African States (ECOWAS). We study the anchor choice when the countries focus the exchange rate policy to promote internal and external competitiveness. We consider four foreign ancho...

Could a monetary union in West Africa (either an informal monetary union of the non-CFA countries, or a possible future monetary union of all ECOWAS members) be an effective 'agency of restraint' (Collier, 1991) on fiscal policies? We discuss the ways, both positive and negative, that monetary union could affect fiscal discipline and the arguments...

Cotton production is truly a success story in West and Central Africa. The region is now the second largest exporter of lint, after the United States, with a world market share of 15 percent. Despite its strong performance in the past, the sector is characterized by several institutional and structural weaknesses that jeopardize its viability in an...

This paper reviews the experience of fiscal adjustment undertaken in the West African Economic and Monetary Union (WAEMU) countries since the entry into force of the 1994 treaty establishing the framework for a regional convergence of national fiscal policies. We propose a measure of the structural deficit that corrects for movements of both the bu...

The coexistence of urban and rural poverty and migration to cities is studied in a dual economy model where the acquisition of skills is costly and involves migration to urban areas. In this model, both the distribution of innate abilities and the distribution of wealth matter for the migration decision, and costs of backmigration may produce an ur...

The dominant theme that emerges is that there is more than one plausible explanation for any slightly mysterious phenomenon (such as the arrival and spread of cholera or yellow fever), that these contending plausible explanations often have radically different implications for public action, and that societies are reluctant to undertake costly or e...

This paper argues that, in analyzing the choice of exchange rate regimes in developing and transition countries in the present global economic context, it is essential to distinguish between those countries with substantial involvement in international financial markets and those where involvement is limited. For developing countries with important...

This paper calculates indices of central bank autonomy (CBA) for 163 central banks as of end-2003, and comparable indices for a subgroup of 68 central banks as of the end of the 1980s. The results confirm strong improvements in both economic and political CBA over the past couple of decades, although more progress is needed to boost political auton...

On April 20, 2000, in Accra, Ghana, the leaders of six West African countries1 declared their intention to proceed to monetary union among the non-CFA2 franc countries of the region by January 2003, as a first step toward a wider monetary union including all the ECOWAS (Economic Community of West African States) countries in 2004. The purpose of th...

This paper compares different nominal anchors in the case of a fixed exchange rate regime for the future single regional currency of the Economic Community of the West African States (ECOWAS). We study the anchor choice when the countries focus the exchange rate policy to promote internal and external competitiveness. We consider four foreign ancho...

This paper analyzes the relationship between banks’ divergent strategies toward specialization and diversification of financial activities and their ability to withstand a banking sector crash. We first generate market-based measures of banks’ systemic risk exposures using extreme value analysis. Systemic banking risk is measured as the tail be...

Increasing emphasis has been placed on the need for an effective lender of last resort for sovereign states and on procedures for sovereign debt restructuring to help cope with global financial crises. Where private creditors use short-term debt to check sovereign debtor`s moral hazard, there is the risk of self-fulfilling crises. In this context,...

The “hollowing-out”, or “two poles” hypothesis is tested in the context of a Markov chain model of exchange rate transitions. In particular, two versions of the hypothesis—that hard pegs are an absorbing state, or that fixes and floats form a closed set, with no transitions to intermediate regimes—are tested using two alternative classifications of...

>p>This article examines the economic aspects of European Union (EU) policy toward its eastern neighbors in the Commonwealth of Independent States (CIS). This region was long considered less important for the EU in comparison with Central and Eastern Europe, which was the subject of farreaching economic and political integration during the two EU e...