Thursday, September 26th, 2013 10:15 am

Capital Outflows

Experience over the past 30 years shows that for the typical emerging market nation facing rapid capital outflows, spending foreign currency reserves to defend its currency is a better policy for its citizens than not doing so.

Responses
 

Source: IGM Economic Experts Panel
www.igmchicago.org/igm-economic-experts-panel

Responses weighted by each expert's confidence

Source: IGM Economic Experts Panel
www.igmchicago.org/igm-economic-experts-panel
Participant University Vote Confidence Comment Bio/Vote History
Acemoglu Daron Acemoglu MIT Disagree 7
Bio/Vote History
         
Alesina Alberto Alesina Harvard Did Not Answer
Bio/Vote History
         
Altonji Joseph Altonji Yale No Opinion
Bio/Vote History
         
Auerbach Alan Auerbach Berkeley No Opinion
Bio/Vote History
         
Autor David Autor MIT Uncertain 10
Bio/Vote History
         
Baicker Katherine Baicker Harvard No Opinion
Bio/Vote History
         
Bertrand Marianne Bertrand Chicago Uncertain 1
Bio/Vote History
         
Chetty Raj Chetty Harvard No Opinion
Bio/Vote History
         
Chevalier Judith Chevalier Yale Disagree 2
Bio/Vote History
         
Currie Janet Currie Princeton Uncertain 1
Bio/Vote History
         
Cutler David Cutler Harvard Uncertain 1
Bio/Vote History
         
Deaton Angus Deaton Princeton Disagree 1
Bio/Vote History
         
Duffie Darrell Duffie Stanford Strongly Disagree 9
Better to allow to devaluation of the currency, promoting exports and not wasting valuable FX reserves, as defense is not likely to succeed.
Bio/Vote History
         
Edlin Aaron Edlin Berkeley No Opinion
Bio/Vote History
         
Eichengreen Barry Eichengreen Berkeley Uncertain 10
Whether intervention is wise depends on why capital is flowing out (bad policies or unfounded panic). In the first case it's hopeless.
Bio/Vote History
         
Fair Ray Fair Yale Disagree 5
Bio/Vote History
         
Goldberg Pinelopi Goldberg Yale Did Not Answer
Bio/Vote History
         
Goolsbee Austan Goolsbee Chicago Uncertain 1
Bio/Vote History
         
Greenstone Michael Greenstone Chicago No Opinion
Bio/Vote History
         
Hall Robert Hall Stanford Uncertain 2
Really tough question. Outside.my expertise.
Bio/Vote History
         
Holmström Bengt Holmström MIT Uncertain 4
Do not know broad evidence. Short time intervention could stem speculation. Long - term wasteful
Bio/Vote History
         
Hoxby Caroline Hoxby Stanford Disagree 5
The right answer depends on the circumstances, especially whether permanent or temporary events account for outflows. Usually: disagree.
Bio/Vote History
         
Judd Kenneth Judd Stanford Disagree 6
Efforts to maintain an overvalued currency will likely exhaust those reserves before they stop the outflows.
Bio/Vote History
         
Kashyap Anil Kashyap Chicago Disagree 5
Depends on the particulars, but it is usually better to fix the problem that is causing the reversal.
Bio/Vote History
         
Klenow Pete Klenow Stanford Disagree 2
Reserve management has not prevented "Sudden Stops" from being a major source of emerging market business cycles.
-see background information here
Bio/Vote History
         
Levin Jonathan Levin Stanford Uncertain 1
Bio/Vote History
         
Maskin Eric Maskin Harvard Agree 5
Bio/Vote History
         
Nordhaus William Nordhaus Yale Strongly Agree 6
Bio/Vote History
         
Obstfeld Maurice Obstfeld Berkeley Uncertain 10
One should use reserves to defnd the financial system (notably banks with USD liabilities), not the "currency" (exchange rate) per se.
Bio/Vote History
         
Saez Emmanuel Saez Berkeley Disagree 3
Bio/Vote History
         
Scheinkman José Scheinkman Princeton Strongly Disagree 8
Bio/Vote History
         
Schmalensee Richard Schmalensee MIT Disagree 3
Bio/Vote History
         
Shin Hyun Song Shin Princeton Did Not Answer
Bio/Vote History
         
Stokey Nancy Stokey Chicago No Opinion
Bio/Vote History
         
Thaler Richard Thaler Chicago No Opinion
Bio/Vote History
         
Udry Christopher Udry Yale Uncertain 4
Bio/Vote History
         
Zingales Luigi Zingales Chicago Did Not Answer
Bio/Vote History
         

10 New Economic Experts join the IGM Panel


For the past two years, our expert panelists have been informing the public about the extent to which economists agree or disagree on important public policy issues. This week, we are delighted to announce that we are expanding the IGM Economic Experts Panel to add ten new distinguished economists. Like our other experts, these new panelists have impeccable qualifications to speak on public policy matters, and their names will be familiar to other economists and the media.

To give the public a broad sense of their views on policy issues, each new expert has responded to a selection of 16 statements that our panel had previously addressed. We chose these 16 statements, which cover a wide range of important policy areas, because the original panelists' responses to them were analyzed in a paper comparing the views of our economic experts with those of the American public. You can find that paper, by Paola Sapienza and Luigi Zingales, here. The paper, along with other analyses of the experts' views, was discussed during the American Economic Association annual meetings, and the video can be found here.

The new panelists' responses to these statements can be seen on their individual voting history pages. Our ten new economic experts are:

Abhijit Banerjee (MIT)
Markus K. Brunnermeier (Princeton)
Liran Einav (Stanford)
Amy Finkelstein (MIT)
Oliver Hart (Harvard)
Hilary Hoynes (Berkeley)
Steven N. Kaplan (Chicago)
Larry Samuelson (Yale)
Carl Shapiro (Berkeley)
Robert Shimer (Chicago)


Please note that, for the 16 previous topics on which these new panelists have voted, we left the charts showing the distribution of responses unchanged. Those charts reflect the responses that our original panelists gave at the time, and we have not altered them to reflect the views of the new experts.

We have also taken this opportunity to ask our original panelists whether they would vote differently on any of the statements we have asked about in the past. Several experts chose to highlight statements to which they would currently respond differently. In such cases, you will see this "revote" below the panelist's original vote. We think you will enjoy seeing examples of statements on which some experts have reconsidered.

As with the 16 previous statements voted on by new panelists, these "revote" responses are not reflected in the chart that we display showing the distribution of views for that topic: all the charts for previous questions reflect the distribution of views that the experts expressed when the statement was originally posed.

About the IGM Economic Experts Panel

This panel explores the extent to which economists agree or disagree on major public policy issues. To assess such beliefs we assembled this panel of expert economists. Statistics teaches that a sample of (say) 40 opinions will be adequate to reflect a broader population if the sample is representative of that population.

To that end, our panel was chosen to include distinguished experts with a keen interest in public policy from the major areas of economics, to be geographically diverse, and to include Democrats, Republicans and Independents as well as older and younger scholars. The panel members are all senior faculty at the most elite research universities in the United States. The panel includes Nobel Laureates, John Bates Clark Medalists, fellows of the Econometric society, past Presidents of both the American Economics Association and American Finance Association, past Democratic and Republican members of the President's Council of Economics, and past and current editors of the leading journals in the profession. This selection process has the advantage of not only providing a set of panelists whose names will be familiar to other economists and the media, but also delivers a group with impeccable qualifications to speak on public policy matters.

Finally, it is important to explain one aspect of our voting process. In some instances a panelist may neither agree nor disagree with a statement, and there can be two very different reasons for this. One case occurs when an economist is an expert on a topic and yet sees the evidence on the exact claim at hand as ambiguous. In such cases our panelists vote "uncertain". A second case relates to statements on topics so far removed from the economist's expertise that he or she feels unqualified to vote. In this case, our panelists vote "no opinion".

The Economic Experts Panel questions are emailed individually to the members of the panel, and each responds electronically at his or her convenience. Panelists may consult whatever resources they like before answering.

Members of the public are free to suggest questions (see link below), and the panelists suggest many themselves. Members of the IGM faculty are responsible for deciding the final version of each week’s question. We usually send a draft of the question to the panel in advance, and invite them to point out problems with the wording if they see any. In response, we typically receive a handful of suggested clarifications from individual experts. This process helps us to spot inconsistencies, and to reduce vagueness or problems of interpretation.

The panel data are copyrighted by the Initiative on Global Markets and are being analyzed for an article to appear in a leading peer-reviewed journal.

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