Consumption Smoothing And Exchange Rate Volatility

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Consumption Smoothing And Exchange Rate Volatility

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Author : Mr.Bart Turtelboom
language : en
Publisher: International Monetary Fund
Release Date : 1995-11-01

Consumption Smoothing And Exchange Rate Volatility written by Mr.Bart Turtelboom and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 1995-11-01 with Business & Economics categories.

This paper analyzes exchange rate behavior in a model where consumers trade goods to diversify shocks to their income. A model with traded and nontraded goods is simulated in a multilateral context based upon historical output correlations for the period 1970–92. Simulation results indicate that the observed volatility of multilateral real exchange rates for the United States, Germany and Japan is not inconsistent with exchange rate volatility implied by consumption-smoothing behavior.

Consumption Smoothing And Exchange Rate Volatility

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Author : Bart G. Turtelboom
language : en
Publisher:
Release Date : 1995

Consumption Smoothing And Exchange Rate Volatility written by Bart G. Turtelboom and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1995 with categories.

Real Interest Rates Real Exchange Rates And Net Foreign Assets In The Adjustment Process

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Author : Mr.Thomas Helbling
language : en
Publisher: International Monetary Fund
Release Date : 1995-12-01

Real Interest Rates Real Exchange Rates And Net Foreign Assets In The Adjustment Process written by Mr.Thomas Helbling and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 1995-12-01 with Business & Economics categories.

This paper analyzes the recent behavior of real exchange rates, the trade balance and the net foreign asset position of the United States in an intertemporal optimizing model of the world economy that incorporates heterogeneity across countries and imperfect international capital and good markets. While the model successfully tracks the dynamics of trade balances and net foreign assets it generates too much consumption smoothing and excessively volatile relative prices. Resolving these inadequacies simultaneously is difficult as the elasticity of substitution between tradables and nontradables affects in opposite ways the degree of consumption smoothing and the volatility of relative prices.

Exchange Rate Volatility Pricing To Market And Trade Smoothing

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Author : Mr.Peter B. Clark
language : en
Publisher: International Monetary Fund
Release Date : 1997-10-01

Exchange Rate Volatility Pricing To Market And Trade Smoothing written by Mr.Peter B. Clark and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 1997-10-01 with Business & Economics categories.

This paper investigates the consequences of exchange rate volatility on the variability of export prices and quantities in the presence of market segmentation and pricing to market. Firms stabilize destination prices through systematic price discrimination, limiting the degree of exchange rate pass-through. Consequently, the variability of exchange rates is not fully translated into prices and quantities at the point of destination. Empirical estimates using aggregate price data for the G-7 industrial countries show incomplete pass-through in variances, with considerable variation among these countries. U.S. industry specific data also indicate incomplete pass-through in most cases, with considerable variation across industries.

Currency Portfolio Of External Debt Exchange Rate Cyclicality And Consumption Volatility

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Author : Eiji Fujii
language : en
Publisher:
Release Date : 2020

Currency Portfolio Of External Debt Exchange Rate Cyclicality And Consumption Volatility written by Eiji Fujii and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2020 with categories.

Even though external debt can play a buffer role against adverse shocks to assist consumption smoothing, it may also exert a volatility amplifying effect, depending on the currency of denomination and the cyclicality of the borrower's exchange rate. We empirically investigate the nexus between the debt denomination portfolio, exchange rate cyclicality, and consumption volatility of low- and middle-income countries. On constructing the debt-weighted effective exchange rates, we examine how the denomination portfolio affects the debtors' exchange rate cyclicality to influence the consumption response to transitory income shocks. We find that portfolio concentration enhances exchange rate pro-cyclicality, which makes consumption more volatile when income shocks occur. Our results suggest that portfolio diversification is a useful tool for countries with original sin to hedge against bumpy consumption paths.

Mean Reversion And Consumption Smoothing

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Author : Fischer Black
language : en
Publisher:
Release Date : 1989

Mean Reversion And Consumption Smoothing written by Fischer Black and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1989 with Consumption (Economics) categories.

Using a simple conventional model with additive separable utility and constant elasticity, we can explain mean reversion and consumption smoothing. The model uses the price of risk and wealth as state variables, but has only one stochastic variable. The price of risk rises temporarily as wealth falls. We also distinguish between risk aversion and the consumption elasticity of marginal utility. We can use the model to match estimates of the average values of consumption volatility, wealth volatility, mean reversion, the growth rate of consumption, the real interest rate, and the market risk premium.

Business Cycle Volatility And Openness

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Author : Assaf Razin
language : en
Publisher:
Release Date : 1992

Business Cycle Volatility And Openness written by Assaf Razin and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1992 with Business cycles categories.

This paper links business cycle volatility to barriers on international mobility of goods and capital. Theory predicts that capital market integration should lower consumption volatility while raising investment volatility, if most shocks are country-specific and transitory. The removal of barriers to trade in goods should enhance specialization and hence output volatility. We test these ideas using a unique panel data set which includes indicators of barriers to trade in both goods and capital flows. However, our empirical results indicate that neither the degree of capital mobility, nor the degree of goods mobility is strongly correlated with the volatility of consumption, investment or output. This may reflect the fact that many business cycle shocks are both persistent and common to many countries.

Implications Of Emu For Global Macroeconomic And Financial Stability

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Author : Björn Döhring
language : en
Publisher:
Release Date : 2008

Implications Of Emu For Global Macroeconomic And Financial Stability written by Björn Döhring and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2008 with European Economic Community countries categories.

This paper assesses the implications of EMU for world macroeconomic and financial stability. After reviewing the predictions made by the literature, it looks at the evidence of the first ten years of EMU. In so doing, it distinguishes the effect of EMU from global factors at work since the 1980s, often referred to as zthe Great Moderationy. The paper concludes that EMU is on the whole having a stabilising effect on the world economy, particularly in neighbouring countries. By helping to stabilise interest rates, inflation and GDP growth in the euro area, EMU has contributed to greater stability of those variables in other advanced countries. There is also evidence that EMU is facilitating international risk sharing and consumption smoothing. Predictions that EMU would increase exchange rate volatility are, in general, not confirmed by the data. However, the amplitude of mediumterm exchange rate swings has increased for some currency pairs. Moreover, there is little evidence so far that EMU has facilitated international policy coordination, partly reflecting the still fragmented representation of the euro area in multilateral fora. -- EU Bookshop.

Consumption Smoothing In A Small Cyclically Volatile Open Economy

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Author : Hall, Viv
language : en
Publisher:
Release Date : 2010

Consumption Smoothing In A Small Cyclically Volatile Open Economy written by Hall, Viv and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2010 with categories.

New Zealand's current account of the balance of payments has been persistently in deficit since the early 1970s and increased markedly during the late 1990s. Should this cause significant concern, for such a small, cyclically volatile open economy? Our results show that VAR1 and VAR2 forms of the traditional intertemporal consumption-smoothing model reflect very satisfactorily the volatile directions and turning points observed, that the data are not consistent with consumption-tilting to the present, and that New Zealand has had considerable success to date in consumption-smoothing around its average 5% current account deficit. Perhaps more unexpectedly, a Bergin-Sheffrin-type model of a small open economy with variable interest rates and exchange rates has not performed noticeably better.

Optimal Currency Areas

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Author : Robert Lafrance
language : en
Publisher:
Release Date : 1999

Optimal Currency Areas written by Robert Lafrance and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1999 with Equilibrium (Economics) categories.

Surveys the recent literature on optimal currency areas (OCAs). Topics that are covered include theoretical developments in the context of general-equilibrium models and empirical work on shocks asymmetry and adjustment mechanisms.