Pick Your Poison: The Choices and 1 4
... undertake when faced with different exogenous shocks. For example, as described in Blanchard, Das, and Faruqee (2010), an increase in perceived risk that reduces capital flows, or a decrease in foreign output that leads to a decrease in domestic exports, often lead to currency depreciations. Depreci ...
... undertake when faced with different exogenous shocks. For example, as described in Blanchard, Das, and Faruqee (2010), an increase in perceived risk that reduces capital flows, or a decrease in foreign output that leads to a decrease in domestic exports, often lead to currency depreciations. Depreci ...
US-Europe Economic Interdependence and Policy
... position is characterized by non-zero-asset holdings, the monetary shock redistributes wealth abroad by lowering the real value of the initial stock of nominal assets. This unfavorable wealth effect can cause domestic consumption to decline relative to foreign if substitutability across goods is not ...
... position is characterized by non-zero-asset holdings, the monetary shock redistributes wealth abroad by lowering the real value of the initial stock of nominal assets. This unfavorable wealth effect can cause domestic consumption to decline relative to foreign if substitutability across goods is not ...
Exchange Rate Volatility and Productivity Growth
... growth proceeds from innovation undertaken by rms with su cient funds to meet liquidity shocks; (ii) wages are sticky, implying that the transmission of macroeconomic shocks is shaped by the choice of exchange rate regime; (iii) rms' debt can be partially or completely denominated in dollars. Firs ...
... growth proceeds from innovation undertaken by rms with su cient funds to meet liquidity shocks; (ii) wages are sticky, implying that the transmission of macroeconomic shocks is shaped by the choice of exchange rate regime; (iii) rms' debt can be partially or completely denominated in dollars. Firs ...
Equilibrium Exchange Rates - National Bureau of Economic Research
... determine equilibrium exchange rates that may be appropriate targets for coordinated policies. I do not here attempt to address the question of whether it makes sense to have exchange rate targets at all, which would bring a number of additional issues into the picture; of course to the extent that ...
... determine equilibrium exchange rates that may be appropriate targets for coordinated policies. I do not here attempt to address the question of whether it makes sense to have exchange rate targets at all, which would bring a number of additional issues into the picture; of course to the extent that ...
NBER WORKING PAPER SERIES MONETARY POLICY IN THE OPEN ECONOMY REVISITED:
... would be irrelevant because the relative price adjustment could be achieved by nominal price changes: If internal prices were as flexible as exchange rates, it would make little economic difference whether adjustments were brought about by changes in exchange rates or by equivalent changes in intern ...
... would be irrelevant because the relative price adjustment could be achieved by nominal price changes: If internal prices were as flexible as exchange rates, it would make little economic difference whether adjustments were brought about by changes in exchange rates or by equivalent changes in intern ...
Keun H. Lee, Northern State University, Farid Sadrieh, Quinnipiac University,
... imports from other regions, giving rise to a greater need for foreign exchanges. In the relatively stronger economy, the need for capital goods would also grow faster and the imports for those goods from abroad would increase as well. Thus, a faster growth in the economy is expected to have a negati ...
... imports from other regions, giving rise to a greater need for foreign exchanges. In the relatively stronger economy, the need for capital goods would also grow faster and the imports for those goods from abroad would increase as well. Thus, a faster growth in the economy is expected to have a negati ...
The currency union effect on trade - Inter
... countries that share a common currency trade three times more than two similar countries with different currencies. Yet while the rapidly expanding literature on this issue, which we will review in the next section, has generally found large and significant common currency effects, it is not clear w ...
... countries that share a common currency trade three times more than two similar countries with different currencies. Yet while the rapidly expanding literature on this issue, which we will review in the next section, has generally found large and significant common currency effects, it is not clear w ...
Exchange rate stabilization in developed and
... McKinnon and Schnabl (2004a, 2004b) stress the asymmetric nature of the world currency system. While the United States as the issuer of the most important international currency pursue an independent monetary policy focused on domestic inflation and growth, most countries outside of Europe tend to s ...
... McKinnon and Schnabl (2004a, 2004b) stress the asymmetric nature of the world currency system. While the United States as the issuer of the most important international currency pursue an independent monetary policy focused on domestic inflation and growth, most countries outside of Europe tend to s ...
This PDF is a selection from an out-of-print volume from... of Economic Research
... if not earlier, multiple rates and restricted convertibility appeared on a broad front throughout the world economy. In Europe exchange control was widely practiced, and Raul Prebisch introduced multiple rates in Argentina. Throughout the 1950s and early 1960s exotic arrangements existed in virtuall ...
... if not earlier, multiple rates and restricted convertibility appeared on a broad front throughout the world economy. In Europe exchange control was widely practiced, and Raul Prebisch introduced multiple rates in Argentina. Throughout the 1950s and early 1960s exotic arrangements existed in virtuall ...
Chapter 15: Options on stock indices and currencies
... EXAMPLE: A portfolio manager expects the market to fall by 25% in the next six months. The current portfolio value is $25M. The manager decides on a 90% hedge by purchasing 6-month puts on the S&P500 index. The portfolio’s beta with the S&P500 index is 2.4. The S&P500 index stands at a level of 1,2 ...
... EXAMPLE: A portfolio manager expects the market to fall by 25% in the next six months. The current portfolio value is $25M. The manager decides on a 90% hedge by purchasing 6-month puts on the S&P500 index. The portfolio’s beta with the S&P500 index is 2.4. The S&P500 index stands at a level of 1,2 ...
Macroeconomic Policy Responses to Financial
... real domestic and external shocks, the recent literature tends to show the advantages of floating exchange rates to respond to the financial crisis. On the one hand, emerging countries with fixed exchange rate regimes experienced weaker decreases in their interest rates relative to floaters (IMF, 20 ...
... real domestic and external shocks, the recent literature tends to show the advantages of floating exchange rates to respond to the financial crisis. On the one hand, emerging countries with fixed exchange rate regimes experienced weaker decreases in their interest rates relative to floaters (IMF, 20 ...
WO R K I N G PA P... WHAT IS GLOBAL EXCESS LIQUIDITY, AND DOES IT MATTER?
... which shocks to excess liquidity could be transmitted across borders. Second, we assess empirically whether excess liquidity measures in individual countries exhibit significant co-movement and whether excess liquidity conditions spills over across borders. In an initial step, we try to gain some un ...
... which shocks to excess liquidity could be transmitted across borders. Second, we assess empirically whether excess liquidity measures in individual countries exhibit significant co-movement and whether excess liquidity conditions spills over across borders. In an initial step, we try to gain some un ...
Mitigating Turkey's Trilemma Tradeoffs Yasin AKÇELİK Orcan ÇÖRTÜK İbrahim M. TURHAN
... With the recognition of full convertibility of the Turkish Lira in 1989, Turkey fully liberalized its capital account and began to face the trilemma tradeoffs during the 90s. During this period, up until the crisis of 2001, pegged exchange rate regime was implemented with the aim of achieving price ...
... With the recognition of full convertibility of the Turkish Lira in 1989, Turkey fully liberalized its capital account and began to face the trilemma tradeoffs during the 90s. During this period, up until the crisis of 2001, pegged exchange rate regime was implemented with the aim of achieving price ...
NBER WORKING PAPER SERIES STABILIZATION POLICIES IN OPEN ECONOMIES Richard C. Marston
... the trade balance, so no foreign disturbance can affect the economy. This strong conclusion about insulation has often been used as an argument for flexible rates, even though it is very sensitive to assumptions about capital mobility. ...
... the trade balance, so no foreign disturbance can affect the economy. This strong conclusion about insulation has often been used as an argument for flexible rates, even though it is very sensitive to assumptions about capital mobility. ...
The Collapse of the Bretton Woods Fixed Exchange Rate System
... liquid dollar claim. In the final attacks in 1971, this was about all that the United States was willing to sell back to foreign central banks before it abandoned ~onvertibility.~ 9.1.2 The Trouble with the Dollar The period through the advent of the two-tiered gold system was one of slowly increasi ...
... liquid dollar claim. In the final attacks in 1971, this was about all that the United States was willing to sell back to foreign central banks before it abandoned ~onvertibility.~ 9.1.2 The Trouble with the Dollar The period through the advent of the two-tiered gold system was one of slowly increasi ...
Real Output and Prices Adjustments under Different
... spurious effects on real output and inflation can be conventionally interpreted as fixed versus flexible exchange rates dilemma. At the same time, macroeconomic effects of various exchange rate arrangements during the crisis period may provide a better insight into suitability of relative exchange r ...
... spurious effects on real output and inflation can be conventionally interpreted as fixed versus flexible exchange rates dilemma. At the same time, macroeconomic effects of various exchange rate arrangements during the crisis period may provide a better insight into suitability of relative exchange r ...
Critically evaluate the International Monetary
... Historically, voting has been dominated by the US (Karns & Mingst 2004:28) due to it being the only country with the power to veto any decision made within the apparatus (Woods 2006:19). However, this is about to shift to reflect the changes in economic power since the end of the Second World War. “ ...
... Historically, voting has been dominated by the US (Karns & Mingst 2004:28) due to it being the only country with the power to veto any decision made within the apparatus (Woods 2006:19). However, this is about to shift to reflect the changes in economic power since the end of the Second World War. “ ...
Global Macro Risks in Currency Excess Returns
... Figure 1 plots the cumulated excess returns from shorting the dollar and going long the foreign currency portfolios. The carry trade performs poorly before the mid 1980s, but its profitability takes 5 While ...
... Figure 1 plots the cumulated excess returns from shorting the dollar and going long the foreign currency portfolios. The carry trade performs poorly before the mid 1980s, but its profitability takes 5 While ...
Liberalization of Foreign Exchange Controls: Japan`s Experiences
... export surplus and exchange rate is contradictory. On the one hand, China is anxious about negative effects of export surplus and devalued currency, such as, unwanted capital inflow, commodities inflation and asset bubbles, increasing fiscal cost, financial repression, and exchange rate risk origina ...
... export surplus and exchange rate is contradictory. On the one hand, China is anxious about negative effects of export surplus and devalued currency, such as, unwanted capital inflow, commodities inflation and asset bubbles, increasing fiscal cost, financial repression, and exchange rate risk origina ...
Exchange Rates, Economic Integration and the International
... whose consequences can be severe, but whose causes are not always fully understood. These shocks have given rise to skepticism about the viability of certain exchange-rate regimes and have stimulated a renewed search for alternative institutional and policy structures. The increasing integration of ...
... whose consequences can be severe, but whose causes are not always fully understood. These shocks have given rise to skepticism about the viability of certain exchange-rate regimes and have stimulated a renewed search for alternative institutional and policy structures. The increasing integration of ...
Chapter 20. Output, the Interest Rate, and the Exchange Rate
... The IS relation between the interest rate and output is drawn in Figure 20–2, panel (a), for given values of all the other variables in the relation— 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 IS relation between the interest rate and output is drawn in Figure 20–2, panel (a), for given values of all the other variables in the relation— 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 ...
Currency war
Currency war, also known as competitive devaluation, is a condition in international affairs where countries compete against each other to achieve a relatively low exchange rate for their own currency. As the price to buy a country's currency falls so too does the price of exports. Imports to the country become more expensive. So domestic industry, and thus employment, receives a boost in demand from both domestic and foreign markets. However, the price increase for imports can harm citizens' purchasing power. The policy can also trigger retaliatory action by other countries which in turn can lead to a general decline in international trade, harming all countries.Competitive devaluation has been rare through most of history as countries have generally preferred to maintain a high value for their currency. Countries have generally allowed market forces to work, or have participated in systems of managed exchanges rates. An exception occurred when currency war broke out in the 1930s. As countries abandoned the Gold Standard during the Great Depression, they used currency devaluations to stimulate their economies. Since this effectively pushes unemployment overseas, trading partners quickly retaliated with their own devaluations. The period is considered to have been an adverse situation for all concerned, as unpredictable changes in exchange rates reduced overall international trade.According to Guido Mantega, the Brazilian Minister for Finance, a global currency war broke out in 2010. This view was echoed by numerous other government officials and financial journalists from around the world. Other senior policy makers and journalists suggested the phrase ""currency war"" overstated the extent of hostility. With a few exceptions, such as Mantega, even commentators who agreed there had been a currency war in 2010 generally concluded that it had fizzled out by mid-2011.States engaging in possible competitive devaluation since 2010 have used a mix of policy tools, including direct government intervention, the imposition of capital controls, and, indirectly, quantitative easing. While many countries experienced undesirable upward pressure on their exchange rates and took part in the ongoing arguments, the most notable dimension of the 2010–11 episode was the rhetorical conflict between the United States and China over the valuation of the yuan. In January 2013, measures announced by Japan which were expected to devalue its currency sparked concern of a possible second 21st century currency war breaking out, this time with the principal source of tension being not China versus the US, but Japan versus the Eurozone. By late February, concerns of a new outbreak of currency war had been mostly allayed, after the G7 and G20 issued statements committing to avoid competitive devaluation. After the European Central Bank launched a fresh programme of quantitative easing in January 2015, there was once again an intensification of discussion about currency war.