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Author: Jorge Eduardo Carrera Publisher: ISBN: Category : Languages : en Pages : 0
Book Description
Do alternative exchange rate regimes affect short-term real exchange rate volatility differently? The existing empirical evidence is quite mixed with slightly more papers supporting that they do. We show that such lack of consensus is mainly due to current literature limitations regarding the measurement of real exchange rates (RERs), the identification of exchange rate regimes (ERRs), and the control for the incidence of real and nominal shocks. To address these limitations, we construct a novel monthly dataset for 63 countries over the period 1946-2007, which includes market-determined multilateral RER and a proxy for terms of trade. We find that ERRs indeed affect short-term real exchange rate volatility differently. While the evidence is generally consistent with Mussa's sticky prices argument, we find that for nonadvanced countries in post-Bretton Woods there exists a “U-shape nominal flexibility puzzle of RER.” We also find evidence of a “short-run RER volatility puzzle.” Having controlled for the incidence of real and nominal shocks, nonadvanced countries' RER volatility remains between 25% and 150% greater than that of the advanced economies. Moreover, the key literature finding that short-term RER volatility is higher in Bretton Woods (BW) than in post-Bretton Woods (PBW) for industrialized countries vanishes when using market-determined multilateral RER instead of official bilateral RER.
Author: Jorge Eduardo Carrera Publisher: ISBN: Category : Languages : en Pages : 0
Book Description
Do alternative exchange rate regimes affect short-term real exchange rate volatility differently? The existing empirical evidence is quite mixed with slightly more papers supporting that they do. We show that such lack of consensus is mainly due to current literature limitations regarding the measurement of real exchange rates (RERs), the identification of exchange rate regimes (ERRs), and the control for the incidence of real and nominal shocks. To address these limitations, we construct a novel monthly dataset for 63 countries over the period 1946-2007, which includes market-determined multilateral RER and a proxy for terms of trade. We find that ERRs indeed affect short-term real exchange rate volatility differently. While the evidence is generally consistent with Mussa's sticky prices argument, we find that for nonadvanced countries in post-Bretton Woods there exists a “U-shape nominal flexibility puzzle of RER.” We also find evidence of a “short-run RER volatility puzzle.” Having controlled for the incidence of real and nominal shocks, nonadvanced countries' RER volatility remains between 25% and 150% greater than that of the advanced economies. Moreover, the key literature finding that short-term RER volatility is higher in Bretton Woods (BW) than in post-Bretton Woods (PBW) for industrialized countries vanishes when using market-determined multilateral RER instead of official bilateral RER.
Author: Atish R. Ghosh Publisher: MIT Press ISBN: 9780262072403 Category : Business & Economics Languages : en Pages : 252
Book Description
An empirical study of exchange rate regimes based on data compiled from 150 member countries of the International Monetary Fund over the past thirty years. Few topics in international economics are as controversial as the choice of an exchange rate regime. Since the breakdown of the Bretton Woods system in the early 1970s, countries have adopted a wide variety of regimes, ranging from pure floats at one extreme to currency boards and dollarization at the other. While a vast theoretical literature explores the choice and consequences of exchange rate regimes, the abundance of possible effects makes it difficult to establish clear relationships between regimes and common macroeconomic policy targets such as inflation and growth. This book takes a systematic look at the evidence on macroeconomic performance under alternative exchange rate regimes, drawing on the experience of some 150 member countries of the International Monetary Fund over the past thirty years. Among other questions, it asks whether pegging the exchange rate leads to lower inflation, whether floating exchange rates are associated with faster output growth, and whether pegged regimes are particularly prone to currency and other crises. The book draws on history and theory to delineate the debate and on standard statistical methods to assess the empirical evidence, and includes a CD-ROM containing the data set used.
Author: Ms.Hong Liang Publisher: International Monetary Fund ISBN: 1451856709 Category : Business & Economics Languages : en Pages : 39
Book Description
A recent study by Grilli and Kaminsky (1991) argues that real exchange rate (RER) behavior is likely to be dependent on the particular historical period rather than on the nominal exchange rate arrangement itself. This paper reexamines RER behavior using alternative data sets, as well as different econometric methods, over the period 1880-1997. It finds strong evidence supporting the nonneutrality hypothesis of nominal exchange regime on RER volatility. Also, regime shifts play an important role in determining the persistence of shocks to the RER.
Author: Bahar Erdal Publisher: Routledge ISBN: 1351801724 Category : Business & Economics Languages : en Pages : 172
Book Description
Originally published in 1997. This study investigates what the effects of real exchange rate volatility are on sectorial investment in the fixed and flexible exchange rate systems. It lays out the results of research into the effects of the levels and volatility of real exchange rates on investment in the manufacturing sectors of the countries in the European Monetary System as well as of the countries in the flexible exchange rate system, with data from between 1973 and 1993. Examining the differences between the two systems in the results this book also looks at exchange rate effects on interest rates at the time.
Author: Mr.Kenneth Rogoff Publisher: International Monetary Fund ISBN: 1451875843 Category : Business & Economics Languages : en Pages : 85
Book Description
Using recent advances in the classification of exchange rate regimes, this paper finds no support for the popular bipolar view that countries will tend over time to move to the polar extremes of free float or rigid peg. Rather, intermediate regimes have shown remarkable durability. The analysis suggests that as economies mature, the value of exchange rate flexibility rises. For countries at a relatively early stage of financial development and integration, fixed or relatively rigid regimes appear to offer some anti-inflation credibility gain without compromising growth objectives. As countries develop economically and institutionally, there appear to be considerable benefits to more flexible regimes. For developed countries that are not in a currency union, relatively flexible exchange rate regimes appear to offer higher growth without any cost in credibility.
Author: Mr.Atish R. Ghosh Publisher: International Monetary Fund ISBN: 1589069315 Category : Business & Economics Languages : en Pages : 48
Book Description
The member countries of the International Monetary Fund collaborate to try to assure orderly exchange arrangements and promote a stable system of exchange rates, recognizing that the essential purpose of the international monetary system is to facilitate the exchange of goods, services, and capital, and to sustain sound economic growth. The paper reviews the stability of the overall system of exchange rates by examining macroeconomic performance (inflation, growth, crises) under alternative exchange rate regimes; implications of exchange rate regime choice for interaction with the rest of the system (external adjustment, trade integration, capital flows); and potential sources of stress to the international monetary system.
Author: Enrique G. Mendoza Publisher: International Monetary Fund ISBN: Category : Business & Economics Languages : en Pages : 40
Book Description
The dominant view in the empirical literature on exchange rates is that the high variability of real exchange rates is due to movements in exchange-rate-adjusted prices of tradable goods. This paper shows that this dominant view does not hold in Mexican data for the periods in which the country had managed exchange rate regimes. Variance analysis of a 30-year sample of monthly data shows that movements in the price of nontradables relative to tradables account for up to 70 percent of the variability of the real exchange rate during these periods. The paper proposes a model in which this stylized fact, and the Sudden Stops that accompanied the collapse of Mexico's managed exchange rates, could result from an endogenous amplification mechanism operating via nontradables prices in economies with dollarized liabilities and credit constraints. The key feature of this mechanism is Irving Fisher's debt-deflation process. Numerical evaluation suggests that the Fisherian deflation effects on consumption, the current account, and relative prices dwarf those induced by the standard balance sheet effect typical of the Sudden Stops literature.
Author: Jorge Eduardo Carrera
Author: Jorge Eduardo Carrera
Author: Atish R. Ghosh
Author: Ms.Hong Liang
Author: Piet Sercu
Author: International Monetary Fund
Author: Bahar Erdal
Author: Mr.Kenneth Rogoff
Author: Mr.Atish R. Ghosh
Author: Victoria S. Farrell
Author: Enrique G. Mendoza