Topic
Currency
About: Currency is a research topic. Over the lifetime, 26697 publications have been published within this topic receiving 485370 citations. The topic is also known as: monetary unit & unit of money.
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TL;DR: The authors empirically evaluates four types of costs that may result from an international sovereign default: reputational costs, international trade exclusion costs, costs to the domestic economy through the financial system, and political costs to authorities.
Abstract: This paper empirically evaluates four types of costs that may result from an international sovereign default: reputational costs, international trade exclusion costs, costs to the domestic economy through the financial system, and political costs to the authorities. It finds that the economic costs are generally significant but short-lived, and sometimes do not operate through conventional channels. The political consequences of a debt crisis, by contrast, seem to be particularly dire for incumbent governments and finance ministers, broadly in line with what happens in currency crises.
312 citations
Journal Article•
TL;DR: In this article, the authors make a systematic analysis of the Tobin tax proposal for foreign exchange transactions and examine the economic desirability of such a levy, its technical and political feasibility, its revenue potential, the possible uses of that revenue, and related administrative and institutional aspects.
Abstract: In his 1972 Janeway Lectures at Princeton, James Tobin, the 1981 Nobel Prize winner for economics, submitted a proposal for a levy on international currency transactions. The idea was not greeted with enthusiasm, as the 1970s were a period of optimism and confidence in floating exchange rages. Yet, whenever currency crises erupted during the past decades, the proposal for a levy on international currency transactions would once again arise. In the 1990s, two additional facts have sharpened interest in the Tobin tax proposal. First is the growing volume of foreign exchange trading. Second, interest is coming not only from policymakers and experts concerned with the smooth functioning of financial markets. It is shared by those concerned with public financing of development-the fiscal crisis of the state as well as the growing need for international cooperation on problems such as the environment, poverty, peace and security. This work makes a systematic analysis of the proposal for a foreign exchange transactions levy. Its chapters examine the economic desirability of such a levy, its technical and political feasibility, its revenue potential, the possible uses of that revenue, and related administrative and institutional aspects.
310 citations
Posted Content•
TL;DR: In this paper, the optimal interest rate policy in currency crises is analyzed and shown to have an ambiguous effect on firms since it both makes more difficult to borrow and may decrease the foreign currency debt burden.
Abstract: This paper analyzes the optimal interest rate policy in currency crises. Firms are credit constrained and have debt in domestic and foreign currency, a situation that may easily lead to a currency crisis. An interest rate increase has an ambiguous effect on firms since it both makes more difficult to borrow and may decrease the foreign currency debt burden. In some cases it is actually best to decrase the interest rate. We also show how these issues are related to the development of the financial system.
310 citations
TL;DR: The authors used the modified Black-Scholes model and a random variance option pricing model to study prices of European currency options traded in Geneva, which includes calls and puts on the dollar/Swiss franc exchange rate.
Abstract: We use the modified Black-Scholes model and a random variance option pricing model to study prices of European currency options traded in Geneva. The options, which cannot be exercised early, include calls and puts on the dollar/Swiss franc exchange rate. In the empirical analysis, we examine the model fit and the biases with respect to the strike price, time to maturity, and volatility. There is some evidence of mispricing and there are small gains available by trading with the random variance model.
309 citations
TL;DR: In this article, the authors provide a broad empirical investigation of momentum strategies in the foreign exchange market and find a significant cross-sectional spread in excess returns of up to 10% per annum (p.a.) between past winner and loser currencies.
304 citations