Topic
Exchange rate
About: Exchange rate is a research topic. Over the lifetime, 47255 publications have been published within this topic receiving 944563 citations. The topic is also known as: foreign-exchange rate & forex rate.
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TL;DR: In this article, the authors discuss why previous literature has found little evidence of any effect of exchange rate variability on international trade and make comparisons of estimations based on different specifications or using different data sets and changes in the results depending on the method used.
Abstract: This paper discusses why previous literature has found little evidence of any effect of exchange rate variability on international trade. Methodological and statistical issues are discussed. In particular, comparisons are made of estimations based on different specifications or using different data sets and changes in the results depending on the method used are shown.
177 citations
TL;DR: The authors assesses the quantitative relevance of the temporaryiness hypothesis by comparing the predictions of a simple model to the actual figures for seven major programs and concludes that nominal interest rates must fall substantially for the "temporariness" hypothesis to account for an important fraction of the observed consumption booms.
177 citations
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TL;DR: In this article, the authors present a small open economy version of the Calvo sticky price model, and show how the equilibrium dynamics can be reduced to simple representation in domestic inflation and the output gap.
Abstract: We lay out a small open economy version of the Calvo sticky price model, and show how the equilibrium dynamics can be reduced to simple representation in domestic inflation and the output gap. We use the resulting framework to analyze the macroeconomic implications of three alternative rule-based policy regimes for the small open economy: domestic inflation and CPI-based Taylor rules, and an exchange rate peg. We show that a key difference among these regimes lies in the relative amount of exchange rate volatility that they entail. We also discuss a special case for which domestic inflation targeting constitutes the optimal policy, and where a simple second order approximation to the utility of the representative consumer can be derived and used to evaluate the welfare losses associated with the suboptimal rules.
176 citations
TL;DR: This article examined the effectiveness of exchange rate intervention within the context of a Markov switching model for the real exchange rate and found that intervention increases the probability of stability when the rate is misaligned, and that its influence grows with the degree of misalignment.
Abstract: I examine the effectiveness of exchange rate intervention within the context of a Markov-switching model for the real exchange rate. The probability of switching between stable and unstable regimes depends non-linearly upon the amount of intervention, the degree of misalignment and the duration of the regime. Applying this to dollar-mark data for the period 1985-98, I find that intervention increases the probability of stability when the rate is misaligned, and that its influence grows with the degree of misalignment. Intervention within a small neighbourhood of equilibrium will result in a greater probability of instability.
176 citations