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.

Exchange Rate Variability and the Slowdown in Growth of International Trade

Abstract: The growth rate of international trade among industrial countries has declined by more than half since the inception of floating exchange rates. To explain the slowdown, the effects of exchange rate volatility are separated from those of other shocks since 1973--in particular, changes in oil prices and in trade regimes. The paper focuses on the effects of exchange rate variability with lags longer than a few months or quarters.

The economics of exchange rates

Abstract: The purpose of this course is to overview the literature in 5 key areas of the Economics of Exchange Rates. The areas are: Exchange rate regimes issues; purchasing power parity and the PPP puzzle; nominal exchange modelling; real exchange rate modelling; the new open economy macroeconomics and exchange rate behaviour; the economics of fixed exchange rates – speculative attack models and the target zone literature. I take an approach which is supportive of a macro-basedfundamentals view of the exchange rate determination process.

Exchange rate pass-through

Abstract: . The resilience of trade balances of the major industrialized economies to changes in their exchange rates has evoked interest in the exchange rate pass-through relationship. So far, there has not been a comprehensive survey of this literature. The paper aims to fill this gap in two ways. First, it pieces together the theoretical literature on exchange rate pass-through. Second, it provides a critical survey of the empirical literature on exchange rate pass-through. Emphasis is placed on the data and methodology employed in previous work. This is done in order to guide future work in this growing area of research.

Price Discrimination by U.S. and German Exporters

Abstract: The insensitivity of the U.S. trade balance to the sharp depreciation of the dollar in the past three years has revived interest in the relationship between exchange rates and the trade balance. A central issue in most analyses of the relation between the current account and the exchange rate concerns the price adjustment process.' The simple integrated, competitive market model predicts that local currency prices should change in proportion to the nominal exchange rate for a country too small to influence world prices. The relationship between local currency import prices and exchange rates has been referred to as the "pass-through" relationship in the empirical literature in international economics. If the proportional relationship between import prices and exchange rates holds, pass-through is said to be complete. Accounts of recent U.S. experience cite the failure of dollar prices of imported goods to rise in proportion to exchange rates (i.e., incomplete pass-through) as an important factor in explaining the persistence of the trade deficit. Unfortunately, observations on pass-through alone provide limited insight into the behavior of markets, since incomplete pass-through is consistent with at least two fundamentally different paradigms. One is the standard competitive model of trade in which the law of one price holds, but exchange rate fluctuations are associated with large changes in import demand due to other factors. For example, if dollar appreciation is correlated with increases in world demand and industry marginal cost is increasing, then pass-through will be less than complete. The other is an imperfectly competitive model in which exporters are capable of price discriminating across destination markets, a phenomenon. Paul Krugman (1987) has labeled "pricing to market." In this model incomplete pass-through is typically associated with fluctuations in the markup of price over marginal cost on exports.2 These fluctuations in markups are believed to be countryspecific; they do not reflect the behavior of prices to other export destinations. Both models are plausible explanations of recent U.S. experience. Unfortunately, it is impossible to distinguish between these competing models using only information on import prices and exchange rates for a single country. In order to distinguish between the competing models, an empirical analysis of goods prices and exchange rates must be capable of measuring either marginal cost or the markup over marginal cost. Either of these tasks poses formidable empirical problems. Much of the empirical literature in industrial organization has been concerned with precisely these issues, since markups are an important measure of the competitiveness of industries.

Common Stochastic Trends in a System of Exchange Rates

Abstract: Univariate tests reveal strong evidence for the presence of a unit root in the univariate time-series representation for seven daily spot and forward exchange rate series. Furthermore, all seven spot and forward rates appear to be cointegrated; that is, the forward premiums are stationary, and one common unit root, or stochastic trend, is detectable in the multivariate time-series models for the seven spot and forward rates, respectively. This is consistent with the hypothesis that the seven exchange rates possess one longrun relationship and that the disequilibrium error around that relationship partly accounts for subsequent movements in the exchange rates. A GENERAL CONSENSUS HAS emerged in recent years that many macroeconomic time series, such as GNP, consumption expenditures, disposable income, etc., can be characterized by a stochastic trend model. In particular, Nelson and Plosser [22] described this property as one of being "difference stationary" so that the first difference of a time series is stationary. An alternative "trend stationary" model, where a stationary component is added to a deterministic trend term, has generally been found to be less appropriate.1 Similarly, it has long been recognized that many financial time series, such as foreign exchange rates, are nonstationary, e.g., in Meese and Singleton [21]. The issue of nonstationary is not merely a statistical curiosity but has several important implications for the modeling of exchange rates. For instance, many models of exchange rate determination under rational expectations require stationarity assumptions when solving out the expected future values of the fundamentals. Further, there has been some controversy over the appropriate transformations to use when conducting tests of whether the forward rate is an unbiased and efficient predictor of the future spot exchange rate.2 Some authors, e.g., Frenkel [11, 12], have conducted tests in levels, while Geweke and Feige [14]