Exchange Market Pressure and the Credibility of Macau's Currency Board
In this study, we assess the credibility of the currency board arrangement (CBA) of the Macau Special Administrative Region by studying the relationship between exchange market pressure (EMP) and the anchors of a rule-based CBA, namely, interest rate arbitrage, exchange rate arbitrage and economic discipline. A pure CBA signals its credibility by allowing the first two anchors to function automatically and by pursuing sound fiscal policies. The analysis’ results suggest that Macau’s CBA has been characterised by a state of low volatility since late 1992, with the brief exception of the East Asian financial crisis period. The paper’s main finding is that fiscal fundamentals seem to have a more pronounced role in reducing EMP’s variability during periods of low volatility whilst interest rate arbitrage is more important in periods of high volatility. We conclude that Macau’s CBA is credible at present as reflected in the low frequency of observed EMP, in the narrowing of Macau’s interest rate differential vis-a-vis U.S. interest rates and in Macau’s substantial fiscal reserves.
Gold-Point Arbitrage and Uncovered Interest Arbitrage under the 1925-1931 Dollar-Sterling Gold Standard
Abstract Efficient gold-point arbitrage confines the exchange rate to the gold-point spread, but efficient uncovered interest arbitrage stabilizes the exchange rate even more, locating it within a narrower "speculation band." Under the 1925-1931 dollar-sterling gold standard, gold-point arbitrage was uniformly efficient, but uncovered interest arbitrage exhibited periodic episodes of apparent inefficiency, susceptible to various explanations. Gold-point arbitrage and uncovered interest arbitrage reinforce each other′s efficiency, thereby enhancing exchange-rate stability. In fact, the dollar-sterling exchange rate during the interwar gold standard was considerably more stable than that in the classical period.
The Politics of Truth: Power in Nietzsche’s Epistemology
This article concerns first a curiosity found in Friedrich Nietzsche’s The Antichrist. In the midst of a heated attack on Christianity, Nietzsche detours into a discussion of epistemology. I argue that this turn indicates the importance of epistemology, and illustrates its political and moral character. The weak, who cannot tolerate uncertainty and shades of gray, seek to impose an epistemology of clarity and certainty. At the same time, the strong, who revel in ambiguity, seek to enjoy the richness and subtlety of a non-dichotomous view of the world. This is a political struggle because the weak cannot allow the strong’s epistemology to exist, let alone prevail. It is not surprising, then, that Nietzsche talks about epistemology in the midst of attacking Christianity: its view of truth is essential to its mission of taming the nobles. Here, I consider Nietzsche as a political thinker in a different light. Political battles are fought far beyond the halls of government. Nietzsche is a political thinker; one, however, who looks at politics in an uncommon way.