The Custom-House

How are exchange rates determined?

How are exchange rates determined?

And why do they matter? Hal Varian explains in his New York Times column:The New York Times > Business > Economic Scene: Exchange Rates the Economy

Who benefits from elimination of

Who benefits from elimination of tariffs and subsidies?

Peter Gallagher points out that, "...it's been demonstrated many times that the biggest winners from the elimination of absurd levels of protection for products such as sugar, oilseeds, cheese, meat, rice and grains are the world's richest and most protectionist countries."

But, "Even poor countries that do not export agricultural products will benefit from the opening of access to markets such as the EU, Japan, Norway, Canada and the USA. Why? Because the effect of astronomically high tariffs in these countries is to depress world market prices and, evenutally, the prices received by farmers in every less protected market.":"Market access matters "

New IMF Head Rodrigo Rato

New IMF Head Rodrigo Rato

The Economist evaluates the likelihood that new IMF head Rodrigo Rato will enjoy a quiet life in "A new boss for the IMF"

"...Can Mr Rato, then, look forward to a quiet life? Probably not. These rare months of tranquility in emerging markets owe a lot to two stars falling into temporary alignment: strong growth and easy money. America�s vigorous recovery and China�s unbridled expansion have made it easy for Latin America and South-East Asia to export their goods. Meanwhile, interest rates at emergency lows in the United States have made it disconcertingly easy for emerging markets to import capital. In the year to March, the spread between emerging-market bonds and United States Treasuries fell by almost three percentage points.

Mr Rato�s honeymoon may not even last the month, however. The market expects Alan Greenspan, the chairman of America�s Federal Reserve, to raise interest rates at its June 30th meeting and to double them by the end of the year. Latin America�s stock, bond, and currency markets are looking towards this event with a mixture of fear and loathing. As J.P. Morgan, an investment bank, recollects in a recent report, the last time Mr Greenspan tightened monetary policy, in 1999-2000, Brazil�s real took a dive. The time before that, in 1994-5, Mexico was hit by its �tequila crisis�. And in 1986-1989, when Mr Greenspan made his debut, a rash of debt defaults followed..."