Estimados Académicos y Académicas FEN,

Les extendemos la invitación al seminario que organiza el Departamento de Economía, titulado "Valuation Effects, Exchange Rates, and Risk Sharing in Emerging Market Economies".

Expone: José De Gregorio, Decano, Facultad de Economía Y Negocios, Universidad de Chile.

Co-autor: Benjamín Peña.

Abstract: We examine the issue of valuation effects in emerging market economies (EMEs), particularly the impact of exchange rate variations on their external wealth. Taking Chile as a case study, we first show that price and exchange rate-induced valuation changes have led to divergent trends between the accumulated current account and the NIIP, which improved markedly between 2019 and 2021 despite extreme social unrest and the Covid crisis. The positive valuation effects are explained by (i) the depreciation of the Chilean peso and (ii) the deficient performance of Chilean firms relative to foreign firms. We interpret these valuation effects in light of the recent literature on the role of the US as a global insurer and show that this also holds for a sample of 20 EMEs. In particular, the correlation between the value of the currency and the NIIP is negative, and the magnitude of the effect of exchange rate changes depends, among other things, on the size of countries' external positions. We show that this negative correlation is due to EMEs having been able to improve their currency mismatches markedly in the early 2000s while countries were opening financially. Our results regarding the exchange rate run counter to the conventional wisdom regarding the effect of currency depreciation in EMEs and suggest that emerging economies are not left out of possible wealth transfers from a global insurer in the international financial system.

El formato será presencial y el seminario se desarrollará en la Sala P-304.

Saludos cordiales,

Dirección de Investigación