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.

The real exchange rate

Abstract: This essay concerns the real value of the $U.S. relative to the G-10. (i) What are the dynamics of the fundamental determinants of the real exchange rate and its steady state value? (ii) To what extent are the observed movements in the exchange rate from 1973 to 1988 due to the fundamentals? (iii) How integrated are international capital markets? (iv) How does the real exchange rate respond to (a) changes in the cyclically adjusted government budget deficit, and to (b) changes in the marginal efficiency of investment?

Foreign Direct Investment in Africa-Some Case Studies

Abstract: This paper reviews the experiences of a few countries in Sub-Saharan Africa that have succeeded in attracting fairly large amounts of foreign investment. The review indicates that sustained efforts to promote political and macroeconomic stability and implement essential structural reforms have been the key elements contributing to the success that certain countries in Africa have achieved in attracting a substantial volume of FDI. Strong leadership, which has helped promote democracy and overcome social and political strife, and a firm commitment to economic reform have been important determinants. The adoption of sound fiscal and monetary policies, supported by an appropriate exchange rate policy, and a proactive approach to removing structural impediments to private sector activity have had a positive bearing on investor sentiment. The analysis underscores the importance of relying on stability and a broad-based reform effort to encourage foreign investment in Africa.

Exchange Rates and Financial Fragility

Abstract: In this paper we analyze three views of the relationship between the exchange rate and financial fragility: (1) the moral hazard hypothesis, according to which pegged exchange rates offer implicit insurance against exchange risk and thereby encourage reckless borrowing and lending; (2) the original sin hypothesis, which emphasizes an incompleteness in financial markets which prevents the domestic currency from being used to borrow abroad or to borrow long term even domestically; and (3) the commitment problem hypothesis, which sees financial crises as resulting from neither moral hazard nor original sin but from the weakness of the institutions that address commitment problems. We examine the evidence on these hypotheses and draw out their implications for exchange-rate policy in emerging markets.

Traded Goods Consumption Smoothing and the Random Walk Behavior of the Real Exchange Rate

Abstract: Conventional explanations of the near random walk behavior of real exchange rates rely on near random walk behavior in the underlying fundamentals (e.g., tastes and technology). The present paper offers an alternative rationale, based on a fixed factor neoclassical model with traded and nontraded goods. The basic idea is that with open capital markets, agents can smooth their consumption of tradeables in the face of transitory traded goods productivity shocks. Agents cannot smooth nontraded goods productivity shocks, but if these are relatively small (as is often argued to be the case) then traded goods consumption smoothing will lead to smoothing of the intra-temporal price of traded and nontraded goods. The (near) random walk implications of the model for the real exchange rate are in stark contrast to the empirical predictions of the classic Balassa-Samuelson model. The paper applies the model to the yen/dollar exchange rate over the floating rate period.