Exchange Rate Determination Puzzle Long Run Behavior And Short Run Dynamics
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Exchange Rate Determination Puzzle
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Author : Falkmar Butgereit
language : en
Publisher: Diplomica Verlag
Release Date : 2010
Exchange Rate Determination Puzzle written by Falkmar Butgereit and has been published by Diplomica Verlag this book supported file pdf, txt, epub, kindle and other format this book has been release on 2010 with Business & Economics categories.
Still after more than thirty years of free floating exchange rates, large parts of exchange rate dynamics remain a puzzle. As this book shows, much progress has been made in explaining exchange rate movements over longer horizons. It also shows, however, that short-run movements are far more challenging to explain. The book is based upon a variety of papers, many of them released recently. A key aspiration of the literature has always been not only to explain past exchange rate behavior but also to forecast out of sample and to compare it to the simple random walk outcome. Here some development has been made after Meese and Rogoff's (1983) truculent verdict of the performance of common exchange rate models. By means of empirical analysis and descriptive statistics this book further supports the established long-run relationships between exchange rates and fundamentals such as expected productivity growth, real GDP growth, domestic investment, interest rates, inflation, government spending, and current account balances. It finds that these fundamentals affect the exchange rate to varying degrees over time. Turning to short-term exchange rate dynamics, it turns out that a different set of forces is at play. The key to explaining short-run movements is to be found in an extensive micro-foundation that factors in a pronounced heterogeneity among market participants and information asymmetries, as well as the possibility of sudden shifts in sentiment, beliefs, and the degree of risk aversion. Promising results have been obtained by order-flow analysis and high frequency data. Also, the consideration of chartism and speculators facilitates understanding for otherwise puzzling exchange rate movements. The last attempt to tackle the understanding of exchange rate behavior is the use of frequency domain analysis and in particular spectral analysis which tries to track down any cyclical patterns in the various moments of time series. And as we shall see forex indeed incorpor
Exchange Rate Determination Puzzle Long Run Behavior And Short Run Dynamics
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Author : Falkmar Butgereit
language : en
Publisher: diplom.de
Release Date : 2009-07-02
Exchange Rate Determination Puzzle Long Run Behavior And Short Run Dynamics written by Falkmar Butgereit and has been published by diplom.de this book supported file pdf, txt, epub, kindle and other format this book has been release on 2009-07-02 with Business & Economics categories.
Inhaltsangabe:Introduction: As the foreign exchange rate market operates twenty-four hours a day and seven days a week it can be described as a global marketplace trading in continuous time. The importance of this market place on weal and woe of economies and agents cannot be overestimated. Long lasting disputes about exchange rate over- and under-evaluation between countries (as most prominently the case between China and the USA) and its implications for international trade, growth rates of economies, unemployment levels, financial money flows, and so forth illustrate this point. As reported by the Bank of International Settlement in its triennial Central Bank Survey 2007, covering 54 countries and jurisdictions, the daily average foreign exchange turnover as of April 2007 has reached a mind-staggering $3.21 trillion. This amount marks an increase of 69 percent compared to the $1.97 trillion three years earlier and highlights the still increasing importance of the exchange rate markets. The U.S. dollar is by far the most important currency as it is involved in 86 percent of all transactions amounting to some $2.7 trillion per day. This is by far bigger than the volume of U.S. international trade in goods and services which for the month April 2007 amounted to (imports + exports) $317.5 billion.1 Indeed, only 17 percent of exchange market turnover has been reported to occur with non-financial customer counterparties, while 43 percent of transactions occur between reporting dealers (i.e. the interbank market) and 40 percent occur between reporting and non-reporting financial institutions (e.g. hedge funds, mutual funds, pension funds, insurance companies). Accordingly, more than 2/3 of the turnover was traded as derivatives such as foreign exchange swaps, outright forwards, or options, while only 1/3 constituted spot rate transactions. These are important facts to consider when talking about forces of exchange rate determination. On ground of these figures one may reasonably explain why old-fashion standard models like the monetary model or purchasing power parity may only hold in the very long run and exchange rate movements may be much more subject to trades based on heterogeneous expectations incurred by investors, speculators and market makers. Particularly at the short-run exchange rates exhibit considerably greater volatility than macroeconomic time series leaving an impression of noisy and chaotic behavior. Throughout this work it [...]
Imperfect Knowledge Economics
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Author : Roman Frydman
language : en
Publisher: Princeton University Press
Release Date : 2023-09-26
Imperfect Knowledge Economics written by Roman Frydman and has been published by Princeton University Press this book supported file pdf, txt, epub, kindle and other format this book has been release on 2023-09-26 with Business & Economics categories.
Posing a major challenge to economic orthodoxy, Imperfect Knowledge Economics asserts that exact models of purposeful human behavior are beyond the reach of economic analysis. Roman Frydman and Michael Goldberg argue that the longstanding empirical failures of conventional economic models stem from their futile efforts to make exact predictions about the consequences of rational, self-interested behavior. Such predictions, based on mechanistic models of human behavior, disregard the importance of individual creativity and unforeseeable sociopolitical change. Scientific though these explanations may appear, they usually fail to predict how markets behave. And, the authors contend, recent behavioral models of the market are no less mechanistic than their conventional counterparts: they aim to generate exact predictions of "irrational" human behavior. Frydman and Goldberg offer a long-overdue response to the shortcomings of conventional economic models. Drawing attention to the inherent limits of economists' knowledge, they introduce a new approach to economic analysis: Imperfect Knowledge Economics (IKE). IKE rejects exact quantitative predictions of individual decisions and market outcomes in favor of mathematical models that generate only qualitative predictions of economic change. Using the foreign exchange market as a testing ground for IKE, this book sheds new light on exchange-rate and risk-premium movements, which have confounded conventional models for decades. Offering a fresh way to think about markets and representing a potential turning point in economics, Imperfect Knowledge Economics will be essential reading for economists, policymakers, and professional investors.
Handbook Of Exchange Rates
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Author : Jessica James
language : en
Publisher: John Wiley & Sons
Release Date : 2012-05-29
Handbook Of Exchange Rates written by Jessica James and has been published by John Wiley & Sons this book supported file pdf, txt, epub, kindle and other format this book has been release on 2012-05-29 with Business & Economics categories.
Praise for Handbook of Exchange Rates “This book is remarkable. I expect it to become the anchor reference for people working in the foreign exchange field.” —Richard K. Lyons, Dean and Professor of Finance, Haas School of Business, University of California Berkeley “It is quite easily the most wide ranging treaty of expertise on the forex market I have ever come across. I will be keeping a copy close to my fingertips.” —Jim O’Neill, Chairman, Goldman Sachs Asset Management How should we evaluate the forecasting power of models? What are appropriate loss functions for major market participants? Is the exchange rate the only means of adjustment? Handbook of Exchange Rates answers these questions and many more, equipping readers with the relevant concepts and policies for working in today’s international economic climate. Featuring contributions written by leading specialists from the global financial arena, this handbook provides a collection of original ideas on foreign exchange (FX) rates in four succinct sections: • Overview introduces the history of the FX market and exchange rate regimes, discussing key instruments in the trading environment as well as macro and micro approaches to FX determination. • Exchange Rate Models and Methods focuses on forecasting exchange rates, featuring methodological contributions on the statistical methods for evaluating forecast performance, parity relationships, fair value models, and flow–based models. • FX Markets and Products outlines active currency management, currency hedging, hedge accounting; high frequency and algorithmic trading in FX; and FX strategy-based products. • FX Markets and Policy explores the current policies in place in global markets and presents a framework for analyzing financial crises. Throughout the book, topics are explored in-depth alongside their founding principles. Each chapter uses real-world examples from the financial industry and concludes with a summary that outlines key points and concepts. Handbook of Exchange Rates is an essential reference for fund managers and investors as well as practitioners and researchers working in finance, banking, business, and econometrics. The book also serves as a valuable supplement for courses on economics, business, and international finance at the upper-undergraduate and graduate levels.
How Do Remittances Affect The Real Exchange Rate An Empirical Investigation
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Author : Ms. Alina Carare
language : en
Publisher: International Monetary Fund
Release Date : 2025-06-20
How Do Remittances Affect The Real Exchange Rate An Empirical Investigation written by Ms. Alina Carare 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 2025-06-20 with categories.
Growing remittance flows to emerging and developing economies may lead to real exchange rate appreciation and weaken their competitiveness. While the empirical literature finds mixed results about the relevance of this relationship, it does not delve into understanding the interplay of two crucial elements for policymakers—the exchange rate regime and the structure of the economy. Filling this gap in the literature, our paper examines how exchange rate regimes and the structure of the economy affect the impact of remittance flows on the real effective exchange rate (REER). Using data from a large sample of economies over 2008-21, we arrive at three key findings. First, REER overvaluation correlates positively with remittance flows under flexible exchange rate regimes. Once controlling for potential endogeneity in a dynamic panel and other variables determining exchange rate behavior, we find that countries with fixed exchange rate regimes also experience appreciation, albeit smaller and slower relative to countries under flexible regimes. Second, we find relatively larger REER appreciation effects for countries that have import-to-GDP ratios lower than the world median, and countries with remittances-to-GDP ratios higher than the world median. Third, for countries that receive relatively high remittances and import relatively less, the REER appreciates after a remittance shock, regardless of the exchange rate regime. The results are robust to alternative classifications, data sources, specifications and sample size.
Forecasting And Hedging In The Foreign Exchange Markets
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Author : Christian Ullrich
language : en
Publisher: Springer Science & Business Media
Release Date : 2009-05-30
Forecasting And Hedging In The Foreign Exchange Markets written by Christian Ullrich and has been published by Springer Science & Business Media this book supported file pdf, txt, epub, kindle and other format this book has been release on 2009-05-30 with Business & Economics categories.
Historical and recent developments at international ?nancial markets show that it is easy to loose money, while it is dif?cult to predict future developments and op- mize decision-making towards maximizing returns and minimizing risk. One of the reasons of our inability to make reliable predictions and to make optimal decisions is the growing complexity of the global economy. This is especially true for the f- eign exchange market (FX market) which is considered as one of the largest and most liquid ?nancial markets. Its grade of ef?ciencyand its complexityis one of the starting points of this volume. From the high complexity of the FX market, Christian Ullrich deduces the - cessity to use tools from machine learning and arti?cial intelligence, e.g., support vector machines, and to combine such methods with sophisticated ?nancial mod- ing techniques. The suitability of this combination of ideas is demonstrated by an empirical study and by simulation. I am pleased to introduce this book to its - dience, hoping that it will provide the reader with interesting ideas to support the understanding of FX markets and to help to improve risk management in dif?cult times. Moreover, I hope that its publication will stimulate further research to contribute to the solution of the many open questions in this area.
Knowledge Information And Expectations In Modern Macroeconomics
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Author : Philippe Aghion
language : en
Publisher: Princeton University Press
Release Date : 2021-01-12
Knowledge Information And Expectations In Modern Macroeconomics written by Philippe Aghion and has been published by Princeton University Press this book supported file pdf, txt, epub, kindle and other format this book has been release on 2021-01-12 with Business & Economics categories.
Macroeconomics would not be what it is today without Edmund Phelps. This book assembles the field's leading figures to highlight the continuing influence of his ideas from the past four decades. Addressing the most important current debates in macroeconomic theory, it focuses on the rates at which new technologies arise and information about markets is dispersed, information imperfections, and the heterogeneity of beliefs as determinants of an economy's performance. The contributions, which represent a breadth of contemporary theoretical approaches, cover topics including the real effects of monetary disturbances, difficulties in expectations formation, structural factors in unemployment, and sources of technical progress. Based on an October 2001 conference honoring Phelps, this incomparable volume provides the most comprehensive and authoritative account in years of the present state of macroeconomics while also pointing to its future. The fifteen chapters are by the editors and by Daron Acemoglu, Jess Benhabib, Guillermo A. Calvo, Oya Celasun, Michael D. Goldberg, Bruce Greenwald, James J. Heckman, Bart Hobijn, Peter Howitt, Hehui Jin, Charles I. Jones, Michael Kumhof, Mordecai Kurz, David Laibson, Lars Ljungqvist, N. Gregory Mankiw, Dale T. Mortensen, Maurizio Motolese, Stephen Nickell, Luca Nunziata, Wolfgang Ochel, Christopher A. Pissarides, Glenda Quintini, Ricardo Reis, Andrea Repetto, Thomas J. Sargent, Jeremy Tobacman, and Gianluca Violante. Commenting are Olivier J. Blanchard, Jean-Paul Fitoussi, Mark Gertler, Robert E. Hall, Robert E. Lucas, Jr., David H. Papell, Robert A. Pollak, Robert M. Solow, Nancy L. Stokey, and Lars E. O. Svensson. Also included are reflections by Phelps, a preface by Paul A. Samuelson, and the editors' introduction.
Explaining Foreign Exchange Market Puzzles
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Author : Mr.Norman C. Miller
language : en
Publisher: International Monetary Fund
Release Date : 1999-03-01
Explaining Foreign Exchange Market Puzzles written by Mr.Norman C. Miller 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 1999-03-01 with Business & Economics categories.
The paper develops a flow model of the exchange rate with speculative capital flows integrated in a rigorous manner. The model is consistent with five foreign exchange market puzzles: (1) occasional discontinuous jumps in the exchange rate; (2) periodic short-term regimes of persistent appreciation/depreciation that can develop into a long swing; (3) the forward discount bias; (4) volatility clusters in the foreign exchange market that create conditional heteroskedasticity; and (5) the dual profitability of betting in the short run against any official foreign exchange intervention, and betting with the intervention in the long run.
Exchange Rates And International Macroeconomics
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Author : Jacob A. Frenkel
language : en
Publisher: University of Chicago Press
Release Date : 2010-01-15
Exchange Rates And International Macroeconomics written by Jacob A. Frenkel and has been published by University of Chicago Press this book supported file pdf, txt, epub, kindle and other format this book has been release on 2010-01-15 with Business & Economics categories.
This volume, presenting some of the finest new research on exchange rates and international macroeconomics, contains papers and critical commentary by thirty-two leading economists. Taken together, these papers provide sound evidence about the effects of real and monetary factors on exchange rates and extend the analyses of exchange rates and international macroeconomics by outlining the kinds of behavior and institutional arrangements that can be incorporated into such analyses. Both empirical and theoretical research are represented, and the contributors analyze such issues as the performance of various models of exchange rate determination, the role of risk and speculation in the forward market for foreign exchange, the rational expectations hypothesis in such markets, the performance of monetary policy in ten industrial countries, the role that labor market contracts play in exchange rate policies, the effect of he oil shocks on the evolution of exchange rates, and the output cost of bringing down inflation in the open economy.
Recent Developments In Asian Economics
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Author : William A. Barnett
language : en
Publisher: Emerald Group Publishing
Release Date : 2021-03-01
Recent Developments In Asian Economics written by William A. Barnett and has been published by Emerald Group Publishing this book supported file pdf, txt, epub, kindle and other format this book has been release on 2021-03-01 with Business & Economics categories.
Recent Developments in Asian Economics is a crucial resource of current, cutting-edge research for any scholar of international finance and economics. Chapters cover a wide range of topics, such as social welfare systems, organizational culture, sustainability, the impact of economic policy uncertainty, and more.