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Accounting For Persistence And Volatility Of Good Level Real Exchange Rates
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Book Synopsis Accounting for Persistence and Volatility of Good-level Real Exchange Rates by : Mario John Crucini
Download or read book Accounting for Persistence and Volatility of Good-level Real Exchange Rates written by Mario John Crucini and published by . This book was released on 2008 with total page 60 pages. Available in PDF, EPUB and Kindle. Book excerpt: Volatile and persistent real exchange rates are observed not only in aggregate series but also in the individual good level data. Kehoe and Midrigan (2007) recently showed that, under a standard assumption on nominal price stickiness, empirical frequencies of micro price adjustment cannot replicate the time-series properties of the law-of-one-price deviations. We extend their sticky price model by combining good specific price adjustment with information stickiness in the sense of Mankiw and Reis (2002). Under a reasonable assumption on the money growth process, we show that the model fully explains both persistence and volatility of the good-level real exchange rates. Furthermore, our framework allows for multiple cities within a country. Using a panel of U.S.-Canadian city pairs, we estimate a dynamic price adjustment process for each 165 individual goods. The empirical result suggests that the dispersion of average time of information update across goods is comparable to that of average time of price adjustment.--Author's description
Book Synopsis Accounting for Presistence and Volatility of Good-level Real Exchange Rates by : Mario J. Crucini
Download or read book Accounting for Presistence and Volatility of Good-level Real Exchange Rates written by Mario J. Crucini and published by . This book was released on 2008 with total page 52 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book PPP Strikes Back written by Jean Imbs and published by . This book was released on 2003 with total page 48 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 corrected estimates are consistent with plausible nominal rigidities, thus, arguably, solving the puzzle. We also explain why traded goods prices account for the bulk of the persistence and volatility of the real exchange rate. The reason is that traded goods prices display dynamics that are more heterogeneous than non-traded ones.
Book Synopsis Sticky Prices and Sectoral Real Exchange Rates by : Patrick J. Kehoe
Download or read book Sticky Prices and Sectoral Real Exchange Rates written by Patrick J. Kehoe and published by . This book was released on 2007 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: The classic explanation for the persistence and volatility of real exchange rates is that they are the result of nominal shocks in an economy with sticky goods prices. A key implication of this explanation is that if goods have differing degrees of price stickiness then relatively more sticky goods tend to have relatively more persistent and volatile good-level real exchange rates. Using panel data, we find only modest support for these key implications. The predictions of the theory for persistence have some modest support: in the data, the stickier is the price of a good the more persistent is its real exchange rate, but the theory predicts much more variation in persistence than is in the data. The predictions of the theory for volatiity fare less well: in the data, the stickier is the price of a good the smaller is its conditional variance while in the theory the opposite holds. We show that allowing for pricing complementarities leads to a modest improvement in the theory's predictions for persistence but little improvement in the theory's predictions for conditional variances.
Book Synopsis Real Frictions and Real Exchange Rate Dynamics by : In Huh
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:
Book Synopsis Exchange-Rate Dynamics by : Martin D. D. Evans
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
Book Synopsis Exchange Rate Policies by : Charles Engel
Download or read book Exchange Rate Policies written by Charles Engel and published by DIANE Publishing. This book was released on 2010-08 with total page 32 pages. Available in PDF, EPUB and Kindle. Book excerpt: Modern macroeconomic theory teaches us new lessons about exchange rates: Currency depreciations or appreciations that change the relative competitiveness of producers in different countries are undesirable from a global perspective if they lead to relative prices that do not reflect the true relative costs of production. ¿External balance¿ does not mean that trade balances should be zero, but rather that global resources are allocated efficiently. The implications of this insight for the role of the exchange rate in monetary policy are explored here. Some of the traditional arguments for purely floating exchange rates are challenged by this approach. Also briefly considers sterilized intervention and comments on the role of international reserves.
Book Synopsis Misalignment of Exchange Rates by : Richard C. Marston
Download or read book Misalignment of Exchange Rates written by Richard C. Marston and published by University of Chicago Press. This book was released on 2008-04-15 with total page 332 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.
Author :International Monetary Fund Publisher :International Monetary Fund ISBN 13 :1498330282 Total Pages :132 pages Book Rating :4.4/5 (983 download)
Book Synopsis Exchange Rate Volatility and Trade Flows--Some New Evidence by : International Monetary Fund
Download or read book Exchange Rate Volatility and Trade Flows--Some New Evidence written by International Monetary Fund and published by International Monetary Fund. This book was released on 2004-05-19 with total page 132 pages. Available in PDF, EPUB and Kindle. Book excerpt: NULL
Book Synopsis Dominant Currency Paradigm: A New Model for Small Open Economies by : Camila Casas
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.
Book Synopsis Handbook of Monetary Economics 3A by :
Download or read book Handbook of Monetary Economics 3A written by and published by Elsevier. This book was released on 2010-12-08 with total page 754 pages. Available in PDF, EPUB and Kindle. Book excerpt: What tools are available for setting and analyzing monetary policy? World-renowned contributors examine recent evidence on subjects as varied as price-setting, inflation persistence, the private sector's formation of inflation expectations, and the monetary policy transmission mechanism. Stopping short of advocating conclusions about the ideal conduct of policy, the authors focus instead on analytical methods and the changing interactions among the ingredients and properties that inform monetary models. The influences between economic performance and monetary policy regimes can be both grand and muted, and this volume clarifies the present state of this continually evolving relationship. - Explores the models and practices used in formulating and transmitting monetary policies - Raises new questions about the volume, price, and availability of credit in the 2007-2010 downturn - Questions fiscal-monetary connnections and encourages new thinking about the business cycle itself - Observes changes in the formulation of monetary policies over the last 25 years
Book Synopsis Handbook of Monetary Economics Vols 3A+3B Set by : Benjamin M. Friedman
Download or read book Handbook of Monetary Economics Vols 3A+3B Set written by Benjamin M. Friedman and published by Newnes. This book was released on 1990 with total page 1729 pages. Available in PDF, EPUB and Kindle. Book excerpt: How have monetary policies matured during the last decade? The recent downturn in economies worldwide have put monetary policies in a new spotlight. In addition to their investigations of new tools, models, and assumptions, they look carefully at recent evidence on subjects as varied as price-setting, inflation persistence, the private sector's formation of inflation expectations, and the monetary policy transmission mechanism. They also reexamine standard presumptions about the rationality of asset markets and other fundamentals. Stopping short of advocating conclusions about the ideal conduct of policy, the authors focus instead on analytical methods and the changing interactions among the ingredients and properties that inform monetary models. The influences between economic performance and monetary policy regimes can be both grand and muted, and this volume clarifies the present state of this continually evolving relationship. Presents extensive coverage of monetary policy theories with an eye toward questions raised by the recent financial crisis Explores the policies and practices used in formulating and transmitting monetary policies Questions fiscal-monetary connnections and encourages new thinking about the business cycle itself Observes changes in the formulation of monetary policies over the last 25 years
Book Synopsis NBER Macroeconomics Annual 2007 by : Daron Acemoglu
Download or read book NBER Macroeconomics Annual 2007 written by Daron Acemoglu and published by . This book was released on 2008-03 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: The NBER Macroeconomics Annual provides a forum for important debates in contemporary macroeconomics and major developments in the theory of macroeconomic analysis and policy that include leading economists from a variety of fields. The papers and accompanying discussions in NBER Macroeconomics Annual 2007 address exchange-rate models; implications of credit market frictions; cyclical budgetary policy and economic growth; the impacts of shocks to government spending on consumption, real wages, and employment; dynamic macroeconomic models; and the role of cyclical entry of new firms and products on the nature of business-cycle fluctuations and on the effects of monetary policy.
Book Synopsis Exchange Rate Economics by : Ronald MacDonald
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""
Book Synopsis Currencies, Commodities and Consumption by : Kenneth W. Clements
Download or read book Currencies, Commodities and Consumption written by Kenneth W. Clements and published by Cambridge University Press. This book was released on 2013-01-31 with total page 401 pages. Available in PDF, EPUB and Kindle. Book excerpt: Discusses economic issues associated with exchange rates, commodity prices, the economic size of countries and alternatives to PPP exchange rates.
Book Synopsis Real Exchange Rates, Economic Complexity, and Investment by : Steve Brito
Download or read book Real Exchange Rates, Economic Complexity, and Investment written by Steve Brito and published by International Monetary Fund. This book was released on 2018-05-10 with total page 21 pages. Available in PDF, EPUB and Kindle. Book excerpt: We show that the response of firm-level investment to real exchange rate movements varies depending on the production structure of the economy. Firms in advanced economies and in emerging Asia increase investment when the domestic currency weakens, in line with the traditional Mundell-Fleming model. However, in other emerging market and developing economies, as well as some advanced economies with a low degree of structural economic complexity, corporate investment increases when the domestic currency strengthens. This result is consistent with Diaz Alejandro (1963)—in economies where capital goods are mostly imported, a stronger real exchange rate reduces investment costs for domestic firms.
Book Synopsis Handbook of International Economics by : R.W. Jones
Download or read book Handbook of International Economics written by R.W. Jones and published by North Holland. This book was released on 1984 with total page 654 pages. Available in PDF, EPUB and Kindle. Book excerpt: Textbook, research papers on international economic theory, economic policy and practice - includes a literature survey of theoretical studies in trade relations; covers evolution of economic models explaining the determinants of trade structure, capital flow, labour mobility, trade in natural resources, etc.; examines macroeconomics aspects of balance of payments, exchange rate, international monetary system, economic relations and dependence, etc. Bibliography, graphs, statistical tables.
