Download or read book Nontraded Goods Market Segmentation and Exchange Rates written by Michael Dotsey and published by . This book was released on 2019 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Empirical evidence suggests that movements in international relative prices (such as the real exchange rate) are large and persistent. Nontraded goods, both in the form of final consumption goods and as an input into the production of final tradable goods, are an important aspect behind international relative price movements. In this paper we show that nontraded goods have important implications for exchange rate behavior, even though fluctuations in the relative price of nontraded goods account for a relatively small fraction of real exchange rate movements. In our quantitative study nontraded goods magnify the volatility of exchange rates when compared to the model without nontraded goods. Cross-country correlations and the correlation of exchange rates with other macro variables are closer in line with the data. In addition, contrary to a large literature, standard alternative assumptions about the currency in which firms price their goods are virtually inconsequential for the properties of aggregate variables in our model, other than the terms of trade.
Download or read book The Roles of the Terms of Trade and Nontraded good prices in Exchange Rate Variations written by Alan C. Stockman and published by . This book was released on 1984 with total page 34 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper demonstrates that disturbances to supplies or demands for internationally traded goods affect exchange-rates differently than do disturbances in markets for nontraded goods. The paper develops a stochastic two-country equilibrium model of exchange rates, asset prices, and goods prices, with two internationally traded goods and a nontraded good in each country. Optimal portfolios differ across countries because of differences in consumption bundles. Changes in exchange-rates, asset prices, and goods prices occur in response to underlying disturbances to supplies and demands for goods. We examine the ways in which responses of the exchange-rate are related to parameters of tastes and production shares, and we discuss conditions under which these exchange-rate responses are "large" compared to the responses of ratios of nominal price indexes.
Download or read book Real Exchange Rate Dynamics in the Presence of Nontraded Goods and Transaction Costs written by Inkoo Lee and published by . This book was released on 2008 with total page 46 pages. Available in PDF, EPUB and Kindle. Book excerpt:
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 Nontraded Goods Prices and Real Exchange Rate Volatility written by Marco Aurelio Hernandez Vega and published by . This book was released on 2011 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation provides new empirical evidence on the importance of nontraded goods in real exchange rate volatility as well as two essays that evaluate the performance of a new trade model á la Ghironi and Melitz [2005] in replicating such evidence. Chapter 2 provides new empirical evidence by looking at more highly disaggregated data than used in previous literature on consumer price index components and trade for the US and Mexico for the period 2002 to 2009. The main empirical results from this exercise suggest that the relative price of nontraded to traded goods (RERN) accounts for between 64% and 73% of the real exchange rate volatility which is significantly higher than that found in past studies (around 30%). The correlation between RERN and the real exchange rate is 71%. In contrast with previous literature lower frequency data increases the importance of RERN in the real exchange rate volatility: for quarterly data it is between 68% and 84% and for annual data the importance is between 78% and 88%. These results provide new evidence against the sticky price theory; while they generally support the Balassa-Samuelson theory, facts regarding the correlation of traded and nontraded goods prices point to the need to modify some features of this theory. Chapter 3 evaluates whether a "new trade" model, where entry of heterogeneous firms into international trade is endogenous, can explain the empirical facts documented in chapter 2 better than can a standard Balassa-Samuelson theory, where nontraded goods are exogenously determined. A symmetric two country dynamic stochastic general equilibrium model with heterogeneous firms and entry and exit from domestic and export markets, á la Ghironi and Melitz (2005), performs reasonably well in certain dimensions. Simulations show that the importance of the relative price of nontraded to traded goods (RERN) can explain between 80% and 89% of real exchange rate fluctuations, and can explain a correlation between RERN and the real exchange rate of 97%. The model fails to replicate the empirical evidence that the relative price of nontraded to traded goods is negatively correlated with the relative price of traded goods. Finally, in chapter 4 I calibrate the model to an asymmetric equilibrium where two different economies interact, one large economy representing the US and one small economy representing Mexico. The calibration will involve updating the value of some exogenous variables like the fixed export costs and re-calibrating the shape parameter k from the Pareto distribution. As a result of this new calibration the steady state of the model matches some of the US-Mexico relationships quite well. For example, the steady state of the model implies that home consumption is four times higher than foreign consumption. This value is close to the one reported by Bergin and Glick [2009]. Home real wage is 1.4 times that of foreign country. This value is significantly smaller than the values reported in other studies where wages in the US are up to eight times higher than in Mexico. Nevertheless, it can be considered a good feature of the model that home wages are higher. I conclude that the asymmetric calibration of the Ghironi and Melitz [2005] model improves its performance in replicating the stylized facts reported in chapter two, although, with some caveats regarding the signs and magnitudes of some of the correlations and the fact that moving from monthly to quarterly frequencies does not increases the importance of the relative price of nontraded to traded goods in explaining real exchange rate volatility.
Download or read book Traded and nontraded goods prices and international risk sharing an empirical investigation written by Giancarlo Corsetti and published by . This book was released on 2011 with total page 62 pages. Available in PDF, EPUB and Kindle. Book excerpt: Accounting for the pervasive evidence of limited international risk sharing is an important hurdle for open-economy models, especially when these are adopted in the analysis of policy trade-offs likely to be affected by imperfections in financial markets. Key to the literature is the evidence, at odds with efficiency, that consumption is relatively high in countries where its international relative price (the real exchange rate) is also high. We reconsider the relation between cross-country consumption differentials and real exchange rates, by decomposing it into two components, reflecting the prices of tradable and nontradable goods, respectively. We document that, as a common pattern among OECD countries, both components tend to contribute to the overall lack of risk sharing, with the tradable price component playing the dominant role in accounting for efficiency deviations. We relate these findings to two mechanisms proposed by the literature to reconcile open economy models with the data. One features strong Balassa-Samuelson effects on nontradable prices due to productivity gains in the tradable sector, with a muted offsetting response of tradable prices. The other, endogenous income effects causing nontradable but especially tradable prices to appreciate with a rise in domestic consumption demand.
Download or read book Three Empirical Essays on the Nontraded Goods Approach to Real Exchange Rate Determination written by Vikas Kakkar and published by . This book was released on 1996 with total page 274 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Consumption and Real Exchange Rates with Incomplete Markets and Non traded Goods written by Gianluca Benigno and published by . This book was released on 2006 with total page 24 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Exchange Rate Policy and the Role of Non Traded Goods Prices in Real Exchange Rate Fluctuations written by Nestor Azcona and published by . This book was released on 2017 with total page 28 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper uses a DSGE model of two small open economies to explain certain features of real exchange rate cyclical fluctuations in countries with fixed and flexible exchange rates, focusing on the role of traded and non-traded goods prices. In particular, the model illustrates why the relative price of nontraded goods and the relative price between domestic and foreign traded goods are more volatile than the real exchange rate under a fixed exchange rate but not under a flexible exchange rate, why deviations from purchasing power parity for traded goods prices can be more volatile under a fixed exchange rate than under a flexible exchange rate, and why there is no correlation between the volatility of the real exchange rate and its variance decomposition.
Download or read book Nontraded Goods and Real Exchange Rates in a Multi Good Ricardian Model written by Roy J. Ruffin and published by . This book was released on 2014 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: The two-country Ricardian trade model with discrete goods and uniform transport costs for tradable goods is applied to the decomposition of the real exchange rate into traded and nontraded components. The real exchange rate is driven almost entirely by changes in the productivity differentials in nontraded goods and also explains the Balassa-Samuelson effect of a lower cost of living in poor countries, but extraordinary transport costs for some nontraded goods are necessary to easily explain the Balassa-Samuelson effect.
Download or read book Nontraded Goods and Macroeconomic Policy Under a Fixed Exchange Rate written by Elhanan Helpman and published by . This book was released on 1975 with total page 52 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Paul A Samuelson written by John Cunningham Wood and published by Taylor & Francis. This book was released on 2005 with total page 464 pages. Available in PDF, EPUB and Kindle. Book excerpt: Samuelson is a key figure in economic thinking. This gathers the essential assessments of this important economist, and provides an unparalleled insight into his lasting impact on economics.
Download or read book Consumption and Real Exchange Rates in Dynamic Exchange Economies with Nontraded Goods written by David Backus and published by . This book was released on 1992 with total page 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 Understanding Real Exchange Rate Movements with Trade in Intermediate Products written by David C. Parsley and published by . This book was released on 2012 with total page 26 pages. Available in PDF, EPUB and Kindle. Book excerpt: We suggest it may be quot;too easyquot; to attribute real exchange rate movements to law of one price deviations. We show that it is immaterial whether one uses seemingly traded goods, nontraded goods, or even just a single, unimportant consumer good, say beer. The ease of attributing the variation to any such deviations is explained using a model with intermediate goods trade. In the model, the stage of production determines the traded/nontraded distinction. We find empirical substantiation for the model: law of one price deviations lose explanatory power; and - defined appropriately in terms of intermediate goods - relative prices matter.
Download or read book Real exchange rate and the prices of nontradable goods written by Fondo Monetario Internacional and published by . This book was released on 1994 with total page 26 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Real Exchange Rates and the Relative Prices of Non traded and Traded Goods written by Jan J. J. Groen and published by . This book was released on 2004 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt:
