1 Currency Areas, Exchange Rate Systems and
... continent? There has been some discussion of a kind of APEC Monetary Fund, and even a currency area based on the yen. But the European model of single currency would not fit at the present time in Asia. The stumbling block is not economics but politics. The single-currency project of the European Un ...
... continent? There has been some discussion of a kind of APEC Monetary Fund, and even a currency area based on the yen. But the European model of single currency would not fit at the present time in Asia. The stumbling block is not economics but politics. The single-currency project of the European Un ...
The structural form of the model can then be conveniently
... Following Blanchard and Quah (1989), SVAR can also be identified using “long run restrictions”. These are restrictions on sums of coefficients in θ (L) and not only on the contemporaneous effect in θ 0 only. These restrictions usually follows from some economic theory, and are therefore considered a ...
... Following Blanchard and Quah (1989), SVAR can also be identified using “long run restrictions”. These are restrictions on sums of coefficients in θ (L) and not only on the contemporaneous effect in θ 0 only. These restrictions usually follows from some economic theory, and are therefore considered a ...
Maurice Obstfeld Paper No. i186 1050 PAPER SERIES
... to withdraw from the foreign exchange market. This implies that the hypothesized run cannot occur along an equilibrium path of the economy. Any investor who anticipates the exchange rate's path will not participate in the attack (even if he believes everyone else will), but will prefer to wait ...
... to withdraw from the foreign exchange market. This implies that the hypothesized run cannot occur along an equilibrium path of the economy. Any investor who anticipates the exchange rate's path will not participate in the attack (even if he believes everyone else will), but will prefer to wait ...
Macro Conference IV
... remain forever at its lower level. Since exchange-rate adjustment is expected to last forever, private agents have no incentives to engage in ...
... remain forever at its lower level. Since exchange-rate adjustment is expected to last forever, private agents have no incentives to engage in ...
The U.S. current account deficit has been growing
... The U.S. current account deficit has been growing for several years, as the country has been importing increasingly more than it has been exporting. In 1992, the current account deficit was 0.8% of GDP, and by the end of 2003, it had soared to an unprecedented 4.8% of GDP. To finance this widening d ...
... The U.S. current account deficit has been growing for several years, as the country has been importing increasingly more than it has been exporting. In 1992, the current account deficit was 0.8% of GDP, and by the end of 2003, it had soared to an unprecedented 4.8% of GDP. To finance this widening d ...
Mankiw 5/e Chapter 5: The Open Economy
... Does PPP hold in the real world? No, for two reasons: 1. International arbitrage not possible. nontraded goods transportation costs 2. Goods of different countries not perfect substitutes. Nonetheless, PPP is a useful theory: • It’s simple & intuitive • In the real world, nominal exchange rates ...
... Does PPP hold in the real world? No, for two reasons: 1. International arbitrage not possible. nontraded goods transportation costs 2. Goods of different countries not perfect substitutes. Nonetheless, PPP is a useful theory: • It’s simple & intuitive • In the real world, nominal exchange rates ...
Chapter 20: Output, the Interest Rate, and the Exchange Rate
... Suppose you know that the domestic price level rises faster than the U.S. price level, Then you know that the country faces a real appreciation that can rapidly make domestic goods noncompetitive. To avoid this effect, countries choose a predetermined depreciation rate against the dollar, a “c ...
... Suppose you know that the domestic price level rises faster than the U.S. price level, Then you know that the country faces a real appreciation that can rapidly make domestic goods noncompetitive. To avoid this effect, countries choose a predetermined depreciation rate against the dollar, a “c ...
Mankiw 5/e Chapter 5: The Open Economy
... Does PPP hold in the real world? No, for two reasons: 1. International arbitrage not possible. nontraded goods transportation costs 2. Goods of different countries not perfect substitutes. Nonetheless, PPP is a useful theory: • It’s simple & intuitive • In the real world, nominal exchange rates ...
... Does PPP hold in the real world? No, for two reasons: 1. International arbitrage not possible. nontraded goods transportation costs 2. Goods of different countries not perfect substitutes. Nonetheless, PPP is a useful theory: • It’s simple & intuitive • In the real world, nominal exchange rates ...
This PDF is a selection from an out-of-print volume from... of Economic Research Volume Title: Exchange Rate Theory and Practice
... existing interest rates. The inducement to seek nonbank channels of unregulated finance, including foreign borrowing, will increase dramatically in this situation. Furthermore, the misallocation of credit caused by arbitrary, nonprice rationing will sharply exacerbate the problems raised by credit c ...
... existing interest rates. The inducement to seek nonbank channels of unregulated finance, including foreign borrowing, will increase dramatically in this situation. Furthermore, the misallocation of credit caused by arbitrary, nonprice rationing will sharply exacerbate the problems raised by credit c ...
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... estimates remain high, the impact on the euro will probably depend on the maturity of the new debt and the reasons for the new issuance. As monetary and fiscal authorities do not strictly target longterm interest rates, new issuance of long-term debt instruments reduces their price in domestic curre ...
... estimates remain high, the impact on the euro will probably depend on the maturity of the new debt and the reasons for the new issuance. As monetary and fiscal authorities do not strictly target longterm interest rates, new issuance of long-term debt instruments reduces their price in domestic curre ...
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... 3. The Bretton Woods Chronology 2. The Period of “dollar glut" (1958-1971): The U.S. serves as a destabilizing force Expansionary domestic (Great Society) and foreign (Vietnam) policies are financed by inflation Key Status of the dollar meant that the U.S. could export inflation and avoid macroecon ...
... 3. The Bretton Woods Chronology 2. The Period of “dollar glut" (1958-1971): The U.S. serves as a destabilizing force Expansionary domestic (Great Society) and foreign (Vietnam) policies are financed by inflation Key Status of the dollar meant that the U.S. could export inflation and avoid macroecon ...
The 1998 Russian crisis: could the exchange Olivier Basdevant
... also on a game between all agents interfering on financial markets, where each participant has to anticipate the behaviour of others. The fact that the timing of financial crisis can hardly been anticipated (which applies particularly well to the Russian crisis) comes mostly from the fact that antic ...
... also on a game between all agents interfering on financial markets, where each participant has to anticipate the behaviour of others. The fact that the timing of financial crisis can hardly been anticipated (which applies particularly well to the Russian crisis) comes mostly from the fact that antic ...
Macroeconomic Theory of Open Economy
... Effect of an Import Quota There is no change in the interest rate because nothing happens in the loanable funds market. There will be no change in net exports. There is no change in net foreign investment even though an import quota reduces imports. ...
... Effect of an Import Quota There is no change in the interest rate because nothing happens in the loanable funds market. There will be no change in net exports. There is no change in net foreign investment even though an import quota reduces imports. ...
Document
... Thus, this reduces excess supply in agricultural sector. Food prices fall at first and then rise. Industrial output rises continuously until long-run equilibrium is reached. Thus, there is no tendency toward instability since it is assumed that industrial prices remain constant. Suppose that industr ...
... Thus, this reduces excess supply in agricultural sector. Food prices fall at first and then rise. Industrial output rises continuously until long-run equilibrium is reached. Thus, there is no tendency toward instability since it is assumed that industrial prices remain constant. Suppose that industr ...
International Conference on Economic and Social Studies, 10
... financial globalization, as suggested by Xing and Zhang (2004). Elbadawi (1994) showed that an increase in inflows in the long run will result in appreciation of the real exchange rate in the long run. Elbadawi (1994) also showed that even in the short-term, inflows tend to be associated with the ov ...
... financial globalization, as suggested by Xing and Zhang (2004). Elbadawi (1994) showed that an increase in inflows in the long run will result in appreciation of the real exchange rate in the long run. Elbadawi (1994) also showed that even in the short-term, inflows tend to be associated with the ov ...
The Academy of Economic Studies The Faculty of Finance
... definition of the ERER . I. The Purchasing Power Parity (PPP). (Froot and Rogoff, 1995; Rogoff, 1997; Breuer, 1994; Haskel and Wolf, 2001 Nurkse (1945), Balassa (1964), Samuelson (1964) proved the inability of the PPP theory to provide the definition of the equilibrium exchange rate → misleading ind ...
... definition of the ERER . I. The Purchasing Power Parity (PPP). (Froot and Rogoff, 1995; Rogoff, 1997; Breuer, 1994; Haskel and Wolf, 2001 Nurkse (1945), Balassa (1964), Samuelson (1964) proved the inability of the PPP theory to provide the definition of the equilibrium exchange rate → misleading ind ...
The Inflation-Openness Payoff Revisited: A Note on Romer vs
... 1/ Standard errors in parentheses. **Significant at the 5% or *10% level. Openness is imports of goods and services as a percent of GDP converted to dollars using market exchange rates as reported in the World Bank’s WDI 2002 CD-Rom. The sample of countries is Romer’s [1993] 114 countries plus Hunga ...
... 1/ Standard errors in parentheses. **Significant at the 5% or *10% level. Openness is imports of goods and services as a percent of GDP converted to dollars using market exchange rates as reported in the World Bank’s WDI 2002 CD-Rom. The sample of countries is Romer’s [1993] 114 countries plus Hunga ...
Introduction
... The Inflation Bias of Discretionary Policymaking If the current equilibrium for the economy is point A, and if the policymaker’s goals are to raise output toward the capacity output level yT but to keep inflation low, then the policymaker’s temptation is to split the difference between these confli ...
... The Inflation Bias of Discretionary Policymaking If the current equilibrium for the economy is point A, and if the policymaker’s goals are to raise output toward the capacity output level yT but to keep inflation low, then the policymaker’s temptation is to split the difference between these confli ...
Untitled
... affected by macroeconomic factors, such as inflation, unemployment, and industrial production. Information on events such as these is easy to find. Fundamental analysis is based on the analysis of economic data, and traders try to use this information to take positions in the market in order to make ...
... affected by macroeconomic factors, such as inflation, unemployment, and industrial production. Information on events such as these is easy to find. Fundamental analysis is based on the analysis of economic data, and traders try to use this information to take positions in the market in order to make ...
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.