The disparities between the EU8 Eastern Europe economies couldn't be greater at this moment. Latvia badly needs to raise, and basically can't, while the Czech Republic needs to lower, but can't really either:
The Czech koruna fell for a sixth day as speculation the central bank will keep interest rates unchanged at the lowest in the European Union this week attracted carry-trade investors.
The Czech koruna, used by investors as a funding currency for investments in higher-yielding assets elsewhere, slid to a 15-month low against the euro. The Czech benchmark rate is now at 2.75 percent after a quarter-point boost last month and will probably be kept on hold at the central bank's meeting on June 28, according to a Bloomberg survey of economists.
``No rate change should be negative for the koruna as it will leave it exposed to the carry trade, which could create the momentum to test the area of 29.0 per euro again,'' said Elisabeth Gruie, currency strategist at BNP Paribas SA in London.
Meanwhile "The Australian and New Zealand dollars rose to the highest in around two decades on speculation investors were attracted to the yield advantage of the countries' bonds over U.S. debt" while Brazil has a sizeable consumer boom on the back of inflows, and in Vietnam the government tries to steer the Dong steadily down.
Something pretty new is basically at work here, and in country after country traditional monetary policy instruments find themselves frustrated. Getting to grips with the underlying structural dynamics of what is happening represents a major challenge for us all.
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Some interesting on topic reading if you have not already:
The Japanese saver characeristics and comparisons
http://www2.e.u-tokyo.ac.jp/~seido/output/Horioka/horioka001.pdf
http://www.boj.or.jp/en/type/ronbun/ron/research/data/ron0009a.pdf
http://www.oeaw.ac.at/vid/download/GreyDragon.pdf
http://www.mof.go.jp/jouhou/soken/kenkyu/ron164.pdf
Poor, (or hedged?) old Ballard
http://www.rbnz.govt.nz/research/bulletin/2002_2006/2005sep68_3dragemunrosleeman.pdf
http://www.rbnz.govt.nz/finstab/fsreport/3011386.pdf
On European demographics:
http://www.munich-economic-summit.com/mes_2007/speeches.htm
like to see your take on all, or any of these.
Hi,
Thanks for the links. Unfortunately pressure of time stops me saying anything worthwhile about them here and now, but if you root around the categories links in the sidebar on the Demography Matters blog you should find lots of material that might interest you.
Maybe one general comment. Most of the links you have sent me relate to people who are aware that demographic changes cause a problem, but normally they situate this problem somewhere away over a 25 or 50 year time horizon. Claus Vistesen and I are convinced that there are real and important macro economic consequences associated with the demographic changes, and some of them are already with us in the here and now. We don't think - eg - you can begin to address the global imbalances issue without looking at the underlying demography. We also think patterns of saving and consumption in countries like Japan, Germany and Italy are notably affected.
We are currently trying to identify the main areas of impact, and get some purchase on how to best measure them.
One good example of where the thing is already impacting in another way, would be Latvia, and see the various posts I have had knocking about this week for this.
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