Monetary Shocks And Real Exchange Rates

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Interest Rates Exchange Rates And World Monetary Policy

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Author : John E. Floyd
language : en
Publisher: Springer Science & Business Media
Release Date : 2009-12-04

Interest Rates Exchange Rates And World Monetary Policy written by John E. Floyd 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 2009-12-04 with Business & Economics categories.

A careful basic theoretical and econometric analysis of the factors determining the real exchange rates of Canada, the U.K., Japan, France and Germany with respect to the United States is conducted. The resulting conclusion is that real exchange rates are almost entirely determined by real factors relating to growth and technology such as oil and commodity prices, international allocations of world investment across countries, and underlying terms of trade changes. Unanticipated money supply shocks, calculated in five alternative ways have virtually no effects. A Blanchard-Quah VAR analysis also indicates that the effects of real shocks predominate over monetary shocks by a wide margin. The implications of these facts for the conduct of monetary policy in countries outside the U.S. are then explored leading to the conclusion that all countries, to avoid exchange rate overshooting, have tended to automatically follow the same monetary policy as the United States. The history of world monetary policy is reviewed along with the determination of real exchange rates within the Euro Area.

Monetary Shocks And Real Exchange Rates In Sticky Price Models Of International Business Cycles

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Author : V. V. Chari
language : en
Publisher:
Release Date : 1997

Monetary Shocks And Real Exchange Rates In Sticky Price Models Of International Business Cycles written by V. V. Chari and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1997 with Business cycles categories.

The data show large and persistent deviations of real exchange rates from purchasing power parity. Recent work has shown that to a large extent these movements are driven by deviations from the law of one price for traded goods. In the data, real and nominal exchange rates are about 6 times as volatile as relative price levels and they both are highly persistent, with serial correlations of 0.85 and 0.83, respectively. This paper develops a sticky price model with price discriminating monopolists, which produces deviations from the law of one price for traded goods. Our benchmark model, which has prices set for one quarter at a time and a unit consumption elasticity of money demand, does not come close to reproducing these observations. A model which has producers setting prices for 6 quarters at a time and a consumption elasticity of money demand of 0.27 does much better. In it real and nominal exchange rates are about 3 times as volatile as relative price levels and exchange rates are persistent, with serial correlations of 0.65 and 0.66, respectively.

Monetary Shocks And Real Exchange Rates

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Author : John H. Rogers
language : en
Publisher:
Release Date : 1998

Monetary Shocks And Real Exchange Rates written by John H. Rogers and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1998 with Foreign exchange rates categories.

Real Shocks And Real Exchange Rates In Really Long Term Data

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Author : John Harold Rogers
language : en
Publisher:
Release Date : 1995

Real Shocks And Real Exchange Rates In Really Long Term Data written by John Harold Rogers and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1995 with Foreign exchange categories.

Sources Of Real Exchange Rate Fluctuations

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Author : Richard H. Clarida
language : en
Publisher:
Release Date : 1994

Sources Of Real Exchange Rate Fluctuations written by Richard H. Clarida and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1994 with Foreign exchange rates categories.

This paper investigates empirically and attempts to identify the sources of real exchange rate fluctuations since the collapse of Bretton Woods. The paper's first two sections survey and extend earlier, non-structural empirical work on this subject by Campbell and Clarida (1987), Meese and Rogoff (1988), and Cumby and Huizinga (1990). The paper's main contribution is to build and estimate a three equation open macro model in the spirit of Dornbusch (1976) and Obstfeld (1985) and to identify the model's structural shocks - to demand, supply, and money -using the approach pioneered by Blanchard and Quah (1989). For two of the four countries we study, Germany and Japan, our structural estimates imply that monetary shocks, to money supply as well as to the demand for real money balances, explain a substantial amount of the variance of real exchange rates relative to the dollar. We find that demand shocks, to national saving and investment, explain the majority of the variance in real exchange rate fluctuations, while supply shocks explain very little. The model's estimated short run dynamics are strikingly consistent with the predictions of the simple textbook Mundell-Fleming model.

Real Exchange Rate Fluctuations And The Business Cycle

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Author : Mr.Bankim Chadha
language : en
Publisher: International Monetary Fund
Release Date : 1996-11-01

Real Exchange Rate Fluctuations And The Business Cycle written by Mr.Bankim Chadha 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 1996-11-01 with Business & Economics categories.

This paper analyzes the relationship between the real exchange rate and the business cycle in Japan during the floating rate period. A structural vector autoregression is used to identify different types of macroeconomic shocks that determine fluctuations in aggregate output and the real exchange rate. Relative nominal and real demand shocks are found to be the main determinants of variation in real exchange rate changes, while relative output growth is driven primarily by supply shocks. Historical decompositions suggest that the sharp appreciations of the yen in 1993 and 1995 and its subsequent depreciation can be attributed primarily to relative nominal shocks.

The Exchange Rate In A Dynamic Optimizing Current Account Model With Nominal Rigidities

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Author : Robert Miguel W. K. Kollman
language : en
Publisher: International Monetary Fund
Release Date : 1997-01-01

The Exchange Rate In A Dynamic Optimizing Current Account Model With Nominal Rigidities written by Robert Miguel W. K. Kollman 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 1997-01-01 with Business & Economics categories.

This paper studies dynamic-optimizing model of a semi-small open economy with sticky nominal prices and wages. The model exhibits exchange rate overshooting in response to money supply shocks. The predicted variability of nominal and real exchange rates is roughly consistent with that of G-7 effective exchange rates during the post-Bretton Woods era. The model predicts that a positive domestic money supply shock lowers the domestic nominal interest rate, that it raises output and that it leads to a nominal and real depreciation of the country’s currency. Increases in domestic labor productivity and in the world interest rate too are predicted to induce a nominal and real exchange rate depreciation.

Targeting The Real Exchange Rate

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Author : Mr.Guillermo Calvo
language : en
Publisher: International Monetary Fund
Release Date : 1994-02-01

Targeting The Real Exchange Rate written by Mr.Guillermo Calvo 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 1994-02-01 with Business & Economics categories.

This paper presents a theoretical and empirical analysis of policies aimed at setting a more depreciated level of the real exchange rate. An intertemporal optimizing model suggests that, in the absence of changes in fiscal policy, a more depreciated level of the real exchange can only be attained temporarily. This can be achieved by means of higher inflation and/or higher real interest rates, depending on the degree of capital mobility. Evidence for Brazil, Chile, and Colombia supports the model’s prediction that undervalued real exchange rates are associated with higher inflation.

Real Exchange Rate Levels Productivity And Demand Shocks

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Author : Menzie David Chinn
language : en
Publisher: International Monetary Fund
Release Date : 1997-05-01

Real Exchange Rate Levels Productivity And Demand Shocks written by Menzie David Chinn 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 1997-05-01 with Business & Economics categories.

We investigate the long-run relationship between the real exchange rate, traded and nontraded productivity levels, and government spending for 14 OECD countries, using recently developed panel cointegration tests. The results indicate that under certain assumptions it is easier to detect cointegration in panel data than in the available time series; moreover, the rate of reversion to long-run equilibrium is estimated with greater precision. Using the model augmented by oil prices, we find that in 1991 (the last year productivity data are available) there is less overvaluation of the U.S. dollar than that implied by a naive version of purchasing power parity.

What Determines Real Exchange Rates The Long And Short Of It

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Author : Mr.Ronald MacDonald
language : en
Publisher: International Monetary Fund
Release Date : 1997-02-01

What Determines Real Exchange Rates The Long And Short Of It written by Mr.Ronald MacDonald 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 1997-02-01 with Business & Economics categories.

This paper presents a reduced-form model of the real exchange rate. Using multilateral cointegration methods, the model is implemented for the real effective exchange rates of the dollar, the mark, and the yen, over the period 1974-1993. In contrast to much other research using real exchange rates, there is evidence of significant and sensible long-run relationships for a simplified version as well as for the full version of the model. The estimated long-run relationships are used to produce dynamic equations, which outperform a random walk and produce sensible dynamic patterns in the context of an impulse response analysis.