This chapter discusses principles and consequences of the common agricultural policy (CAP) of the European Community (EC). It shows that agricultural pricing policies aimed at supporting farm incomes were already in place in EC member countries before the inception of the CAP; indeed, in the presence of these policies, the CAP was a logical consequence of the extension of the common market to the agricultural sector. Thus, the flaws of the CAP can be traced back to national policies and attitudes toward agriculture. Recognition of the burden of agricultural support on the rest of the economy, as well as the growing budgetary costs, has elicited a greater public interest in the CAP. Equally, the trade frictions caused by export subsidies have underlined the CAP's international implications. For these reasons, the member states appear more determined than hitherto to bring agricultural expenditure under control. Given the wider effects of the CAP both on EC economies and the international community, it is to be hoped that current efforts at reform will be successful.
This paper discusses various developments and perspectives of the European Monetary System (EMS). There have been three phases in the development of the EMS: from its beginning in March 1979 to March 1983, can be seen as a phase of trial and orientation; from March 1983 to 1987, can be described as one of consolidation; and The Basle/Nyborg agreement marked the end of the consolidation phase, characterized by the striving for stability, the emergence of the deutsche mark as the anchor currency, and the predominance of intramarginal intervention in partner currencies. EMS has allowed simultaneous progress toward external and internal stability. The EMS Agreement provided for fluctuation margins offering some flexibility and for the possibility of central rate changes, which could compensate for diverging monetary policies. As divergences were narrowed, central rate adjustments could be small so as not to affect market rates; thus minimizing the potential for destabilizing capital flows.
Mr. Owen Evens, Mr. Thomas H. Mayer, Mr. Philip M Young, and Horst Ungerer
This study reviews developments in the European Monetary System from the beginning of 1983 to August 1986; it updates and complements an earlier study prepared by staff members of the International Monetary Fund and published Occasional Paper No. 19, which covered the time period from the inception of the European Monetary System to the end of 1982.
Mrs. Anne C Jansen, Mr. Donald J Mathieson, Mr. Barry J. Eichengreen, Ms. Laura E. Kodres, Mr. Bankim Chadha, and Mr. Sunil Sharma
Hedge funds are collective investment vehicles, often organized as private partnerships and resident offshore for tax and regulatory purposes. Their legal status places few restrictions on their portfolios and transactions, leaving their managers free to use short sales, derivative securities, and leverage to raise returns and cushion risk. This paper considers the role of hedge funds in financial market dynamics, with particular reference to the Asian crisis.
Mr. Peter Nyberg, Horst Ungerer, and Mr. Owen Evens
This paper is concerned with developments in the European Monetary System (EMS) from its start in March 1979 through December 1982. Chapter I provides a summary of events leading up to the establishment of the EMS and a survey of its main features. Chapter II assesses the performance of the system by describing major exchange rate developments and examining the extent to which exchange rate stability and convergence of economic developments within the EMS have been achieved. Chapter III discusses the evolution of the system with special attention to various operational aspects and a summary of proposals for the institutional development of the system. Chapter IV considers the relationship between the EMS and the International Monetary Fund (IMF). The appendices contain statistical material and a bibliography.
Mr. Barry J. Eichengreen and Mr. Donald J Mathieson
Hedge funds are collective investment vehicles, often organized as private partnerships and resident offshore for tax and regulatory purposes. Their legal status places few restrictions on their portfolios and transactions, leaving their managers free to use short sales, derivative securities, and leverage to raise returns and cushion risk. This occasional paper considers the role of hedge funds in financial market dynamics, with particular reference to the Asian crisis.
The striking turnaround in the Netherlands’ economic performance over the past decade and a half has attracted widespread attention. Emerging from deep recession and high unemployment in the early 1980s, the economy shifted to a pace of growth more rapid than that in neighboring economies, and posted a rise in employment close to that in the United States. Even adjusted for an increase in part-time work, job creation in the Netherlands has compared favorably with the experience elsewhere in Europe.
In the late 1970s and early 1980s the economic situation in the Netherlands deteriorated dramatically, leaving the economy, by 1982, in a state of crisis. In 1982, real GDP had declined for the second year in succession, with GDP per capita falling below the level of 1978. The profitability of firms was close to zero: the capital income share in value added in 1982 was less than 5 percent—leaving no profits after interest payments. Registered unemployment had risen sharply—from 3½ percent in 1979 to 8½ percent in 1982. Also, the fiscal deficit was increasing rapidly, reaching 9½ percent of GDP on a broad definition including on-lending (6½ percent on a Maastricht definition) in 1982.
Mr. Barry J. Eichengreen and Mr. Donald J Mathieson
Each episode of instability in international financial markets heightens the attention of government officials and others to the role played by institutional investors, and hedge funds in particular. This was the case in 1992, following the crisis affecting the exchange rate mechanism (ERM) of the European Monetary System. It was the case in 1994, a period of turbulence in international bond markets. It was again the case in 1997 in the wake of the financial upheavals in Asia. In each case, it has been suggested, hedge funds precipitated major movements in asset prices, either through the sheer volume of their own transactions or via the tendency of other market participants to follow their lead.