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.

No Single Currency Regime Is Right for All Countries or at All Times

Abstract: This essay considers some prescriptions that are currently popular regarding exchange rate regimes: a general movement toward floating, a general movement toward fixing, or a general movement toward either extreme and away from the middle. The whole spectrum from fixed to floating is covered (including basket pegs, crawling pegs, and bands), with special attention to currency boards and dollarization. One overall theme is that the appropriate exchange rate regime varies depending on the specific circumstances of the country in question (which includes the classic optimum currency area criteria, as well as some newer criteria related to credibility) and depending on the circumstances of the time period in question (which includes the problem of successful exit strategies). Latin American interest rates are seen to be more sensitive to US interest rates when the country has a loose dollar peg than when it has a tight peg. It is also argued that such relevant country characteristics as income correlations and openness can vary over time, and that the optimum currency area criterion is accordingly endogenous.

Globalizing Capital: A History of the International Monetary System

Abstract: The importance of the International Monetary System is evident in the daily news stories about fluctuating currencies and in dramatic events, such as the recent reversals in the Mexican economy. It has become increasingly apparent that one cannot understand the international economy without knowing how its monetary system operates. This volume tells the story of the international financial system over the past 150 years. It is intended not only for economists, but also for a general audience of historians, political scientists, professionals in government and business, and anyone with a broad interest in international economic and political relations. The book demonstrates that insights into the International Monetary System and effective principles for governing it can result only if is seen as a historical phenomenon extending from the gold standard period to interwar instability, then to Bretton Woods and, finally, to the post-1973 period of fluctuating currencies. Eichengreen analyzes the shift from pegged to floating exchange rates in the 1970s, and ascribes that change to the growing capital mobility that has made pegged rates difficult to maintain. However, he shows that capital mobility was also high prior to World War I, yet this did not prevent the maintenance of fixed exchange rates. What was critical for the successful maintenance of fixed exchange rates during that period was the fact that governments were relatively insulated from democratic politics and, thus, from pressure to trade off exchange rate stability for other goals, such as the reduction of unemployment. Today, pegging exchange rates would require very radical reforms of a sort that governments are understandably reluctant to embrace. The implication seems undeniable: floating rates are here to stay. Barry Eichengreen is the author of "Golder Fetters: The Gold Standard and the Great Depression, 1918-1939".

How do Different Exporters React to Exchange Rate Changes

Abstract: This paper analyzes the heterogenous reaction of exporters to exchange rate changes using a very rich French rm-level dataset with destination-specic export values and volumes on the period 19952005. We nd that high-performance rms react to a depreciation by increasing signicantly more their markup and by increasing less their export volume. This heterogeneity in pricing to market is robust to dierent measures of performance, samples and econometric specications. It is consistent with models where demand elasticity decreases with rm performance. Since aggregate exports are concentrated on high productivity rms, precisely those that absorb more exchange rate movements in

Firm-Specific Assets and the Link between Exchange Rates and Foreign Direct Investment.

Abstract: Foreign direct investment (FDI) theory and empirical studies have generated mixed support for a link between exchange rates and FDI. This paper argues that exchange rate movements may affect acquisition FDI because acquisitions involve firm-specific assets which can generate returns in currencies other than that used for purchase. Using data on Japanese acquisitions in the United States across three-digit SIC industries from 1975 to 1992, maximum-likelihood estimates from discrete dependent variable models support the hypothesis that real dollar depreciations make Japanese acquisitions more likely in U.S. industries, particularly those which more likely have firm-specific assets. Copyright 1997 by American Economic Association.