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: The authors argue that the international financial consequences of immigration exert a strong influence on the choice of exchange rate regimes in the developing world and that remittances increase the likelihood that policymakers adopt fixed exchange rates.
Abstract: This article argues that the international financial consequences of immigration exert a strong influence on the choice of exchange rate regimes in the developing world. Over the past two decades, migrant remittances have emerged as a significant source of external finance for developing countries, often exceeding conventional sources of capital such as foreign direct investment and bank lending. Remittances are unlike nearly all other capital flows in that they are stable and move countercyclically relative to the recipient country’s economy. As a result, they mitigate the costs of forgone domestic monetary policy autonomy and also serve as the “risk-sharing” mechanism required by standard political economy models of currency unions. The observable implication of these arguments is that remittances increase the likelihood that policymakers adopt fixed exchange rates. An analysis of data on de facto exchange rate regimes and a newly available dataset on remittances for up to 74 developing countries from 1983 to 2004 provides strong support for these arguments; the results are robust to instrumental variable analysis and the inclusion of multiple economic and political control variables.
164 citations
Book•
02 Apr 2006TL;DR: De Grauwe and Grimaldi as discussed by the authors provided an alternative view of the workings of foreign exchange markets based on the idea that agents use simple forecasting rules and switch to those rules that have been shown to be the most profitable in the past.
Abstract: This book provides an alternative view of the workings of foreign exchange markets The authors' modeling approach is based on the idea that agents use simple forecasting rules and switch to those rules that have been shown to be the most profitable in the past This selection mechanism is based on trial and error and is probably the best possible strategy in an uncertain world, the authors contend It creates a rich dynamic in the foreign exchange markets and can generate bubbles and crashes Sensitivity to initial conditions is a pervasive force in De Grauwe and Grimaldi's model It explains why large exchange-rate changes and volatility clustering occur It also has important implications for understanding how the news affects the exchange rate De Grauwe and Grimaldi conclude that news in fundamentals has an unpredictable effect on the exchange rate Sometimes, they maintain, it alters the exchange rate considerably; at other times it has no effectwhatsoever The authors also use their model to analyze the effects of official interventions in the foreign exchange market They show that simple intervention rules of the "leaning-against-the-wind" variety can be effective in eliminating bubbles and crashes in the exchange rate They further demonstrate how, quite paradoxically, by intervening in the foreign exchange market the central bank makes the market look more efficient Clear and comprehensive, The Exchange Rate in a Behavioral Finance Framework is a must-have for analysts in foreign exchange markets as well as students of international finance and economics
164 citations
TL;DR: In this article, the authors propose a posterior odds analysis of the hypothesis of a unit root in real exchange rates. And they show that from a Bayesian viewpoint, the random walk hypothesis is a posteriori as probable as a stationary AR(1) process for four out of eight time series investigated.
164 citations
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TL;DR: In this article, the authors assess the extent to which the capital controls were effective in delivering the outcomes that motivated their inception in the first place and conclude that in two of the three cases (Brazil and Thailand), the controls did not deliver much of what was intended.
164 citations
TL;DR: In this article, variable velocity, durability, and habit persistence in a standard two-country general equilibrium model were introduced and their effects on the variability of exchange rate changes, forward premiums, and the foreign exchange risk premium.
Abstract: This article successively introduces variable velocity, durability, and habit persistence in a standard two-country general equilibrium model and explores their effects on the variability of exchange rate changes, forward premiums, and the foreign exchange risk premium A new feature of the model is that agents make decisions at a weekly frequency and face conditionally heteroskedastic shocks Nevertheless, even the most complex model fails to deliver sufficiently variable risk premiums without causing forward premiums and exchange rates to be excessively variable Unlike previous models, the model can roughly match the persistence of forward premiums Article published by Oxford University Press on behalf of the Society for Financial Studies in its journal, The Review of Financial Studies
163 citations