Author: Michael A. JenkinsPublisher:
ISBN:
Category : Foreign exchange rates
Languages : en
Pages : 0
Book Description
Real Exchange Rates and Hysteresis
Author: Michael A. JenkinsPublisher:
ISBN:
Category : Foreign exchange rates
Languages : en
Pages : 0
Book Description
Endogenous Norms in Wage and Price Setting and Hysteresis in the Real Exchange Rate
Author: Emiliano LibmanPublisher:
ISBN:
Category :
Languages : en
Pages : 0
Book Description
Real exchange rates are often 'disconnected' from fundamentals. Mean reversion toward equilibrium operates at a slow pace (if it operates at all), and when inflation is low the real exchange rate tracks closely the nominal exchange rate for prolonged periods of time. Using a simple open economy model, we show that including endogenous norms in wage and price setting in an open economy set-up can lead to hysteresis in the real exchange rate. For a given set of fundamentals, the real exchange rate may settle down at different equilibria and exchange rate policies are not necessarily neutral in the long-run.
Haircuts Or Hysteresis?
Author: John H. RogersPublisher:
ISBN:
Category : Banks and banking
Languages : en
Pages : 90
Book Description
Exchange Rate Hysteresis
Author: Richard E. BaldwinPublisher:
ISBN:
Category : Balance of trade
Languages : en
Pages : 52
Book Description
Using the sticky price monetary model of exchange rate determination and the sunk cost model of trade hysteresis, we show that a sufficiently large policy misalignment can induce hysteresis in the trade balance and thereby alter the steady?state real exchange rate. Thus in our model exchange rate dynamics are path dependent, PPP need not hold and money need not be neutral even in the very long run. We present only positive analysis but conjecture that the results have strong welfare, policy, and econometric implications. Since hysteresis in our model can entail industrial dislocation and the scrappage of sunk assets, we suggest that these factors may constitute a welfare cost of large policy misalignments that have not been formally considered. On the policy side, one could sensibly argue against the dollar volatility of the 1980s without at the same time arguing for a return to a formal exchange rate regime (because 1980s-size swings may involve welfare costs that 1970s-size swings do not). Lastly, since the long-run exchange rate is path dependent, standard empirical tests of exchange rate models may be misspecified.
Real Exchange Rate and Hysteresis
Author: Michael A. JenkinsPublisher:
ISBN:
Category : Foreign exchange rates
Languages : en
Pages : 8
Book Description
Exchange rate hysteresis
Author: Richard BaldwinInsignificant and Inconsequential Hysteresis
Author: David C. ParsleyPublisher:
ISBN:
Category : Balance of trade
Languages : en
Pages : 36
Book Description
This paper casts doubt on the validity of the hysteresis hypothesis as an explanation of the persistent U.S. trade deficits in the 1980s. We propose two tests to investigate two different implications of the hypothesis. The first implication is that cumulative changes in exchange rates, in addition to current exchange rate levels, are important determinants of trade flows. The second implication is that foreign exporting firms' perceptions of exchange rate volatility will affect their decisions to enter or exit the market. We find little support for either aspect of the hysteresis hypothesis.
Exchange Rates and Trade
Author: José CampaPublisher:
ISBN:
Category : Foreign exchange rates
Languages : en
Pages : 48
Book Description
Misalignment of Exchange Rates
Author: Richard C. MarstonPublisher: University of Chicago Press
ISBN: 0226507254
Category : Business & Economics
Languages : en
Pages : 332
Book Description
Economists writing on flexible exchange rates in the 1960s foresaw neither the magnitude nor the persistence of the changes in real exchange rates that have occurred in the last fifteen years. Unexpectedly large movements in relative prices have lead to sharp changes in exports and imports, disrupting normal trading relations and causing shifts in employment and output. Many of the largest changes are not equilibrium adjustments to real disturbances but represent instead sustained departures from long-run equilibrium levels, with real exchange rates remaining "misaligned" for years at a time. Contributors to Misalignment of Exchange Rates address a series of questions about misalignment. Several papers investigate the causes of misalignment and the extent to which observed movements in real exchange rates can be attributed to misalignment. These studies are conducted both empirically, through the experiences of the United States, Great Britain, Japan, and the countries of the European Monetary System, and theoretically, through models of imperfect competition. Attention is then turned to the effects of misalignment, especially on employment and production, and to detailed estimates of the effects of changes in exchange rates on several industries, including the U.S. auto industry. In response to the contention that there is significant "hysteresis" in the adjustment of employment and production to changes in exchange rates, contributors also attempt to determine whether the effects of misalignment can be reversed once exchange rates return to earlier levels. Finally, the issue of how to avoid—or at least control—misalignment through macroeconomic policy is confronted.
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