Download or read book Information Frictions and Real Exchange Rate Dynamics written by Giacomo Candian and published by . This book was released on 2017 with total page 60 pages. Available in PDF, EPUB and Kindle. Book excerpt: Real exchange rates are highly volatile and persistent. I provide a novel structural explanation for these facts using a model with dispersed information among firms. When producers face strategic complementarities in price-setting, uncertainty about competitors' beliefs results in sluggish price adjustment that can generate large and long-lived real exchange rate movements. I estimate the model using data from the US and Euro Area, and show that it successfully explains the unconditional volatility and persistence of the real exchange rate. The model also accounts for the persistent and hump-shaped real exchange rate behavior conditional on monetary disturbances documented by a structural VAR. About 50% of this persistence is due to the inertial dynamics of higher-order beliefs.
Download or read book Real Frictions and Real Exchange Rate Dynamics written by In Huh and published by . This book was released on 2012 with total page 24 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Real Frictions and Real Exchange Rate Dynamics written by In Hŏ and published by . This book was released on 2012 with total page 24 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Exchange Rate Dynamics written by Martin D. D. Evans and published by Princeton University Press. This book was released on 2011-03-14 with total page 561 pages. Available in PDF, EPUB and Kindle. Book excerpt: A comprehensive and in-depth look at exchange-rate dynamics Variations in the foreign exchange market influence all aspects of the world economy, and understanding these dynamics is one of the great challenges of international economics. This book provides a new, comprehensive, and in-depth examination of the standard theories and latest research in exchange-rate economics. Covering a vast swath of theoretical and empirical work, the book explores established theories of exchange-rate determination using macroeconomic fundamentals, and presents unique microbased approaches that combine the insights of microstructure models with the macroeconomic forces driving currency trading. Macroeconomic models have long assumed that agents—households, firms, financial institutions, and central banks—all have the same information about the structure of the economy and therefore hold the same expectations and uncertainties regarding foreign currency returns. Microbased models, however, look at how heterogeneous information influences the trading decisions of agents and becomes embedded in exchange rates. Replicating key features of actual currency markets, these microbased models generate a rich array of empirical predictions concerning trading patterns and exchange-rate dynamics that are strongly supported by data. The models also show how changing macroeconomic conditions exert an influence on short-term exchange-rate dynamics via their impact on currency trading. Designed for graduate courses in international macroeconomics, international finance, and finance, and as a go-to reference for researchers in international economics, Exchange-Rate Dynamics guides readers through a range of literature on exchange-rate determination, offering fresh insights for further reading and research. Comprehensive and in-depth examination of the latest research in exchange-rate economics Outlines theoretical and empirical research across the spectrum of modeling approaches Presents new results on the importance of currency trading in exchange-rate determination Provides new perspectives on long-standing puzzles in exchange-rate economics End-of-chapter questions cement key ideas
Download or read book Money Capital and Exchange Rate Fluctuations written by Gomis-Porqueras, Pere and published by . This book was released on 2013 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: We explore how the informational frictions underlying monetary exchange affect international exchange rate dynamics. Our perfectly flexible price model is capable of producing endogenously rigid international relative prices in response to technology and monetary shocks. The model is capable of accounting for the empirical regularities that the real and nominal exchange rates are more volatile than U.S. output, and that the two are positively and perfectly correlated. The model is also consistent with other standard real business cycle facts for the United States.
Download or read book A Monetary Model of the Exchange Rate with Informational Frictions written by Enrique Martínez-García and published by . This book was released on 2015 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Data for the U.S. and the Euro-area during the post-Bretton Woods period shows that nominal and real exchange rates are more volatile than consumption, very persistent, and highly correlated with each other. Standard models with nominal rigidities match reasonably well the volatility and persistence of the nominal exchange rate, but require an average contract duration above 4 quarters to approximate the real exchange rate counterparts. I propose a two-country model with financial intermediaries and argue that: First, sticky and asymmetric information introduces a lag in the consumption response to currently unobservable shocks, mostly foreign. Accordingly, the real exchange rate becomes more volatile to induce enough expenditure-switching across countries for all markets to clear. Second, differences in the degree of price stickiness across markets and firms weaken the correlation between the nominal exchange rate and the relative CPI price. This correlation is important to match the moments of the real exchange rate. The model suggests that asymmetric information and differences in price stickiness account better for the stylized facts without relying on an average contract duration for the U.S. larger than the current empirical estimates.
Download or read book Dominant Currency Paradigm A New Model for Small Open Economies written by Camila Casas and published by International Monetary Fund. This book was released on 2017-11-22 with total page 62 pages. Available in PDF, EPUB and Kindle. Book excerpt: Most trade is invoiced in very few currencies. Despite this, the Mundell-Fleming benchmark and its variants focus on pricing in the producer’s currency or in local currency. We model instead a ‘dominant currency paradigm’ for small open economies characterized by three features: pricing in a dominant currency; pricing complementarities, and imported input use in production. Under this paradigm: (a) the terms-of-trade is stable; (b) dominant currency exchange rate pass-through into export and import prices is high regardless of destination or origin of goods; (c) exchange rate pass-through of non-dominant currencies is small; (d) expenditure switching occurs mostly via imports, driven by the dollar exchange rate while exports respond weakly, if at all; (e) strengthening of the dominant currency relative to non-dominant ones can negatively impact global trade; (f) optimal monetary policy targets deviations from the law of one price arising from dominant currency fluctuations, in addition to the inflation and output gap. Using data from Colombia we document strong support for the dominant currency paradigm.
Download or read book Exchange Rate Economics written by Ronald MacDonald and published by Routledge. This book was released on 2005 with total page 334 pages. Available in PDF, EPUB and Kindle. Book excerpt: ''In summary, the book is valuable as a textbook both at the advanced undergraduate level and at the graduate level. It is also very useful for the economist who wants to be brought up-to-date on theoretical and empirical research on exchange rate behaviour.'' ""Journal of International Economics""
Download or read book The Dynamics of the Real Exchange Rate in a Small Open Economy written by Guay C. Lim and published by . This book was released on 1993 with total page 29 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Investment Creation and Real Exchange Rates in a Model with Search Frictions written by Gita Gopinath and published by . This book was released on 2000 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Foreign Investment is modeled as the outcome of a search process that emphasizes the distinction between investment creation and investment destruction processes which underlie net flows. The optimal q is shown to equal the difference between a naive net present value calculation and the call option of further search. The investment mechanism is embedded in a two-sector dynamic small open-economy model to derive the response of the economy to a capital market liberalization. The presence of an option value to search is shown to generate dynamics in investment inflows, which when combined with the saving-production decisions of households, generates co-movement in real exchange rates, consumption, current account deficits and non-traded sector output which closely resembles the experience of several Latin-American countries, starting in the late nineteen eighties. The search approach to investment contrasts with the standard q-theory approach which generates counterfactual predictions in this framework. Lastly, the paper evaluates the effect of cyclical shocks on direct investment decisions and provides an argument for the observed stability of these flows.
Download or read book PPP Strikes Back written by Mr. Haroon Mumtaz and published by International Monetary Fund. This book was released on 2003-04-01 with total page 43 pages. Available in PDF, EPUB and Kindle. Book excerpt: We show the importance of a dynamic aggregation bias in accounting for the PPP puzzle. We prove that established time-series and panel methods substantially exaggerate the persistence of real exchange rates because of heterogeneity in the dynamics of disaggregated relative prices. When heterogeneity is properly taken into account, estimates of the real exchange rate half-life fall dramatically, to little more than one year, or significantly below Rogoff''s "consensus view" of three to five years. We show that corrected estimates are consistent with plausible nominal rigidities, thus, arguably, solving the PPP puzzle.
Download or read book An Empirical Assessment of the Exchange Rate Pass through in Mozambique written by International Monetary Fund and published by International Monetary Fund. This book was released on 2021-05-06 with total page 34 pages. Available in PDF, EPUB and Kindle. Book excerpt: Determining the magnitude and speed of the exchange rate passthrough (ERPT) to inflation has been of paramount importance for policy-makers in developed and emerging economies. This paper estimates the exchange rate passthrough in Mozambique using econometric techniques on a sample spanning from 2001 to 2019. Results suggest that the ERPT is assymetric, sizable and fast, with 50 percent of the exchange rate variations passing through to prices in less than six months. Policy-makers should continue to pursue low and stable inflation and develop a strong track record of prudent macroeconomic policies for the ERPT to decline.
Download or read book Money Exchange Rates and Output written by Guillermo A. Calvo and published by MIT Press. This book was released on 1996 with total page 536 pages. Available in PDF, EPUB and Kindle. Book excerpt: Guillermo Calvo, who foresaw the financial crisis that followed the devaluationn of Mexico's peso, has spent much of his career thinking beyond the conventional wisdom. In a quiet and understated way, Calvo has made seminal contributions to several major research areas in macroeconomics, particularly monetary policy, exchange rates, public debt, and stabilization in Latin America and post-communist countries. Money, Exchange Rates, and Output brings together these contributions in a broad selection of the author's work over the past two decades. There are introductions to each section, and an introduction to the entire collection that outlines the connections throughout and survey the current state of macroeconomic theory. Specific issues covered are predetermined exchange rates, currency substitution, domestic public debt and seigniorage, and stabilizing transition economics.
Download or read book International Macroeconomics in the Wake of the Global Financial Crisis written by Laurent Ferrara and published by Springer. This book was released on 2018-06-13 with total page 300 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book collects selected articles addressing several currently debated issues in the field of international macroeconomics. They focus on the role of the central banks in the debate on how to come to terms with the long-term decline in productivity growth, insufficient aggregate demand, high economic uncertainty and growing inequalities following the global financial crisis. Central banks are of considerable importance in this debate since understanding the sluggishness of the recovery process as well as its implications for the natural interest rate are key to assessing output gaps and the monetary policy stance. The authors argue that a more dynamic domestic and external aggregate demand helps to raise the inflation rate, easing the constraint deriving from the zero lower bound and allowing monetary policy to depart from its current ultra-accommodative position. Beyond macroeconomic factors, the book also discusses a supportive financial environment as a precondition for the rebound of global economic activity, stressing that understanding capital flows is a prerequisite for economic-policy decisions.
Download or read book The Macroeconomic Effects of Trade Tariffs written by Jesper Lindé and published by International Monetary Fund. This book was released on 2017-07-07 with total page 54 pages. Available in PDF, EPUB and Kindle. Book excerpt: We study the robustness of the Lerner symmetry result in an open economy New Keynesian model with price rigidities. While the Lerner symmetry result of no real effects of a combined import tariff and export subsidy holds up approximately for a number of alternative assumptions, we obtain quantitatively important long-term deviations under complete international asset markets. Direct pass-through of tariffs and subsidies to prices and slow exchange rate adjustment can also generate significant short-term deviations from Lerner. Finally, we quantify the macroeconomic costs of a trade war and find that they can be substantial, with permanently lower income and trade volumes. However, a fully symmetric retaliation to a unilaterally imposed border adjustment tax can prevent any real or nominal effects.
Download or read book China Linking Markets for Growth written by Ross Garnaut and published by ANU E Press. This book was released on 2007-08-01 with total page 466 pages. Available in PDF, EPUB and Kindle. Book excerpt: China's prosperity is at the core of the emerging Platinum Age of global economic growth. Rapid economic growth has been underpinned by expansion in its domestic markets, and the integration of domestic and international markets in goods, services, capital, labour and foreign exchange. Global commodity prices have reached historic highs, while Chinas capital outflows have helped to hold down interest rates worldwide. Linking markets, both domestic and international, has been key to Chinas success. In sustaining its strong economic growth, China has become one of the worlds most voracious consumers of energy. The challenge now facing the government and people of China is in achieving cooperation with the international community to avert the costs - both economic and environmental - of accelerating energy consumption. CHINA: LINKING MARKETS FOR GROWTH gathers together leading scholars on Chinas economic success and its effect on the world economy into the next few decades.
Download or read book Technology Shocks and Aggregate Fluctuations written by Mr.Pau Rabanal and published by International Monetary Fund. This book was released on 2004-12-01 with total page 68 pages. Available in PDF, EPUB and Kindle. Book excerpt: Our answer: Not so well. We reached that conclusion after reviewing recent research on the role of technology as a source of economic fluctuations. The bulk of the evidence suggests a limited role for aggregate technology shocks, pointing instead to demand factors as the main force behind the strong positive comovement between output and labor input measures.
