Currency crises and monetary policy in an economy with credit
... then implies that the currency must depreciate in the current period as well. In other words, if people believe that the currency will depreciate, it may indeed depreciate. Multiple short-run equilibria in the market for foreign exchange are thus possible. A currency crisis occurs either when expect ...
... then implies that the currency must depreciate in the current period as well. In other words, if people believe that the currency will depreciate, it may indeed depreciate. Multiple short-run equilibria in the market for foreign exchange are thus possible. A currency crisis occurs either when expect ...
5 The Short-Run IS-LM-FX Model of an Open Economy
... The Real Exchange Rate and the Trade Balance: United States, 1975-2012 Does the real exchange rate affect the trade balance in the way we have assumed? The data show that the U.S. trade balance is correlated with the U.S. real effective exchange rate index. Because the trade balance also depends on ...
... The Real Exchange Rate and the Trade Balance: United States, 1975-2012 Does the real exchange rate affect the trade balance in the way we have assumed? The data show that the U.S. trade balance is correlated with the U.S. real effective exchange rate index. Because the trade balance also depends on ...
IOSR Journal of Economics and Finance (IOSR-JEF)
... Oil Price and Exchange Rate Volatility in Nigeria According to Trung and Vinh (2011) there are two reasons why macroeconomic variables should be affected by oil shocks. First, oil increase leads to lower aggregate demand given that income is redistributed between net oil import and export countries ...
... Oil Price and Exchange Rate Volatility in Nigeria According to Trung and Vinh (2011) there are two reasons why macroeconomic variables should be affected by oil shocks. First, oil increase leads to lower aggregate demand given that income is redistributed between net oil import and export countries ...
Research and Monetary Policy Department Working Paper No:07/07
... there is imperfect information in the credit market and acquiring the information is costly, external resources become more expensive compared with internal resources. In this case the …rm’s cash ‡ows and net worth plays a critical role in determining the availability and the cost of …nance. Besides ...
... there is imperfect information in the credit market and acquiring the information is costly, external resources become more expensive compared with internal resources. In this case the …rm’s cash ‡ows and net worth plays a critical role in determining the availability and the cost of …nance. Besides ...
The Effects of Budget Deficit Reduction on the Exchange Rate
... exchange rate to fall may be partly offset. Typically, long-term interest rates do not fall one-for-one with decreases in expected inflation. For example, if expected inflation falls 100 basis points, the nominal long-term interest rate may fall only 80 basis points. In such a case, the real, or inf ...
... exchange rate to fall may be partly offset. Typically, long-term interest rates do not fall one-for-one with decreases in expected inflation. For example, if expected inflation falls 100 basis points, the nominal long-term interest rate may fall only 80 basis points. In such a case, the real, or inf ...
tipec 04/1 - Trent University
... multinational corporations. This trade is priced simply as bookkeeping entries within a firm's overall accounting and the impact of exchange rate movements can be compensated for by adjustments in transfer pricing within the company.13 This disinterest in the potential benefits of a fixed exchange ...
... multinational corporations. This trade is priced simply as bookkeeping entries within a firm's overall accounting and the impact of exchange rate movements can be compensated for by adjustments in transfer pricing within the company.13 This disinterest in the potential benefits of a fixed exchange ...
Analysis of the Discount Factors in Swap Valuation
... In 1983, William Lawton, the Head Trader for Fixed Income Derivatives at First Interstate Bank in Los Angeles constructed and executed the first known swaption which was for one year. A right was sold to enter into an interest rate swap for five years, in which the holder paid fixed cash flows in or ...
... In 1983, William Lawton, the Head Trader for Fixed Income Derivatives at First Interstate Bank in Los Angeles constructed and executed the first known swaption which was for one year. A right was sold to enter into an interest rate swap for five years, in which the holder paid fixed cash flows in or ...
Political Contagion in Currency Crises
... differences across large investors for major currencies; and the cascade model relies on significant transactions costs in order to generate sequential behavior, but foreign exchange markets are not characterized by such high transactions costs. Moreover, in discussions of the applicability of casca ...
... differences across large investors for major currencies; and the cascade model relies on significant transactions costs in order to generate sequential behavior, but foreign exchange markets are not characterized by such high transactions costs. Moreover, in discussions of the applicability of casca ...
Sebastian NEER WORKING PAPER SERIES OF CAPITAL CONTROLS AND ROLE
... This paper was started when Edwards was a visiting scholar at the Fund during the summer of 1988. We thank many Fund colleagues for helpful discussions and comments. We are grateful to Miguel Savastano for his detailed comments. Edwards gratefully acknowledges financial support from the NSF, and fro ...
... This paper was started when Edwards was a visiting scholar at the Fund during the summer of 1988. We thank many Fund colleagues for helpful discussions and comments. We are grateful to Miguel Savastano for his detailed comments. Edwards gratefully acknowledges financial support from the NSF, and fro ...
Real Exchange Rates and Competitiveness: The Political Economy
... real wages in the export sector are relatively lower, explaining high competitiveness. And real wages in the sheltered sector are relatively higher on account of its reduced supply of labor and wage compression, implying higher sheltered sector prices and a higher real exchange rate. Both centralize ...
... real wages in the export sector are relatively lower, explaining high competitiveness. And real wages in the sheltered sector are relatively higher on account of its reduced supply of labor and wage compression, implying higher sheltered sector prices and a higher real exchange rate. Both centralize ...
This PDF is a selection from an out-of-print volume from... of Economic Research Volume Title: Exchange Rate Theory and Practice
... disturbances in the markets for goods and assets even though agents have rational expectations. This feature is a consequence of the assumption that labor market participants set a base nominal wage and, in some versions of the model, an indexing parameter before other markets meet. Whether one open ...
... disturbances in the markets for goods and assets even though agents have rational expectations. This feature is a consequence of the assumption that labor market participants set a base nominal wage and, in some versions of the model, an indexing parameter before other markets meet. Whether one open ...
Filed Pursuant to Rule 424(b)(3) Registration No. 333
... The Basket is designed to allow investors to participate in exchange rate movements of the currencies included in the Basket, as reflected by changes in the European Union euro value of the Basket, over the term of the Notes. The currencies that compose the Basket are the Singapore dollar, Russian r ...
... The Basket is designed to allow investors to participate in exchange rate movements of the currencies included in the Basket, as reflected by changes in the European Union euro value of the Basket, over the term of the Notes. The currencies that compose the Basket are the Singapore dollar, Russian r ...
This PDF is a selection from a published volume from... Bureau of Economic Research
... This paper studies the effects of time- varying volatility shocks in the open economy. More specifically, it analyzes the consequences of productivity volatility shocks, monetary- policy volatility shocks, and inflation-target volatility shocks for the dynamics of exchange rates, the yield curve, an ...
... This paper studies the effects of time- varying volatility shocks in the open economy. More specifically, it analyzes the consequences of productivity volatility shocks, monetary- policy volatility shocks, and inflation-target volatility shocks for the dynamics of exchange rates, the yield curve, an ...
Chapter 20. Output, the Interest Rate, and the Exchange Rate
... namely T, G, Y ∗ , i∗ , and E¯e . The IS curve is downward sloping: An increase in the interest rate leads to a decrease in output. It looks very much the same as in the closed economy, but it hides a more complex relation than before: The interest rate affects output not only directly, but also ind ...
... namely T, G, Y ∗ , i∗ , and E¯e . The IS curve is downward sloping: An increase in the interest rate leads to a decrease in output. It looks very much the same as in the closed economy, but it hides a more complex relation than before: The interest rate affects output not only directly, but also ind ...
Purchasing power parity
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Purchasing power parity (PPP) is a component of some economic theories and is a technique used to determine the relative value of different currencies.Theories that invoke purchasing power parity assume that in some circumstances (for example, as a long-run tendency) it would cost exactly the same number of, say, US dollars to buy euros and then to use the proceeds to buy a market basket of goods as it would cost to use those dollars directly in purchasing the market basket of goods.The concept of purchasing power parity allows one to estimate what the exchange rate between two currencies would have to be in order for the exchange to be at par with the purchasing power of the two countries' currencies. Using that PPP rate for hypothetical currency conversions, a given amount of one currency thus has the same purchasing power whether used directly to purchase a market basket of goods or used to convert at the PPP rate to the other currency and then purchase the market basket using that currency. Observed deviations of the exchange rate from purchasing power parity are measured by deviations of the real exchange rate from its PPP value of 1.PPP exchange rates help to minimize misleading international comparisons that can arise with the use of market exchange rates. For example, suppose that two countries produce the same physical amounts of goods as each other in each of two different years. Since market exchange rates fluctuate substantially, when the GDP of one country measured in its own currency is converted to the other country's currency using market exchange rates, one country might be inferred to have higher real GDP than the other country in one year but lower in the other; both of these inferences would fail to reflect the reality of their relative levels of production. But if one country's GDP is converted into the other country's currency using PPP exchange rates instead of observed market exchange rates, the false inference will not occur.