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.

Current Account Reversals and Currency Crises; Empirical Regularities

Abstract: This paper studies sharp reductions in current account deficits and large exchange rate depreciations in low- and middle-income countries. It examines which factors help predict the occurrence of a reversal or a currency crisis, and how these events affect macroeconomic performance. It finds that both domestic factors, such as the low reserves, and external factors, such as unfavourable terms of trade and high interest rates in industrial countries, trigger reversals and currency crises. The two types of events are, however, distinct; indeed, current account imbalances are not sharply reduced in the years following a currency crisis. Economic performance around these events is also quite different. An exchange rate crash is associated with a fall in output growth and a recovery thereafter, while for reversal events there is no systematic evidence of a growth slowdown.

When Do Central Bank Interventions Influence Intra-Daily and Longer-Term Exchange Rate Movements?

Abstract: This paper examines dollar interventions by the G3 since 1989, and the reasons that trader reactions to these interventions might differ over time and across central banks. Market microstructure theory provides a framework for understanding the process by which sterilized central bank interventions are observed and interpreted by traders, and how this process in turn, might influence exchange rates. Using intra-daily and daily exchange-rate and intervention data, the paper analyzes the influence of interventions on exchange-rate volatility, finding evidence of both within day and daily impact effects, but little evidence that interventions influence longer term volatility.

The theory of monetary integration

Abstract: Research dealing with the theory of monetary integration is reviewed. After briefly describing the genesis of the theory as foreshadowed in work on optimum currency areas, the paper assesses two main areas of recent research — the analysis of the effects of disturbances on participating countries in a currency area, and reputational considerations. With regard to disturbances, the paper finds that it is difficult to draw clear-out inferences from theoretical work on the optimal degree of exchange rate management and from empirical studies on the effects of shocks. Work on reputational issues is found to suffer from conceptual problems and has generated empirical results that have not supported the hypothesis that participation in a currency area is a sufficient condition to enhance reputation.

Capital Controls and the International Transmission of U.S. Money Shocks

Abstract: In this paper we assess whether capital controls effectively insulate countries from U.S. monetary shocks, looking simultaneously at a large range of country experiences in a unified estimation framework. We estimate the effect of identified U.S. monetary shocks on the exchange rate and foreign country interest rates, and test whether countries with less open capital accounts exhibit systematically smaller responses. We find essentially no evidence in favor of this notion. Other country factors such as the exchange rate regime or degree of dollarization explain more of the cross-country differences in responses. The significant differences in responses we do find are more pronounced at short horizons. JEL classification: F32, F34