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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.


Papers
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Posted Content
TL;DR: A review of the literature on the long-run real exchange rate can be found in this paper, where the authors distinguish three different stages of PPP testing and focus on what has been learned from each, and conclude that simple, univariate random walk specifications can be rejected in favor of stationary alternatives.
Abstract: This paper reviews the large and growing literature which tests PPP and other models of the long-run real exchange rate. We distinguish three different stages of PPP testing and focus on what has been learned from each. The most important overall lesson has been that the real exchange rate appears stationary over sufficiently long horizons. Simple, univariate random walk specifications can be rejected in favor of stationary alternatives. However, we argue that multivariate tests, which ask whether any linear combination of prices and exchange rates are stationary, have not necessarily provided meaningful rejections of nonstationarity. We also review a number of other theories of the long run real exchange rate -- including the Balassa-Samuelson hypothesis -- as well as the evidence supporting them. We argue that the persistence of real exchange rate movements can be generated by a number of sensible models and that Balassa- Samuelson effects seem important, but mainly for countries with widely disparate levels of income of growth. Finally, this paper presents new evidence testing the law of one price on 200 years of historical commodity price data for England and France, and uses a century of data from Argentina to test the possibility of sample-selection bias in tests of long-run PPP.

572 citations

Journal ArticleDOI
TL;DR: In this paper, the authors developed a theoretical framework that combines variable markups due to strategic complementarities and endogenous choice to import intermediate inputs to understand low aggregate exchange rate passthrough as well as the variation in pass-through across exporters.
Abstract: Large exporters are simultaneously large importers. In this paper, we show that this pattern is key to understanding low aggregate exchange rate pass-through as well as the variation in pass-through across exporters. First, we develop a theoretical framework that combines variable markups due to strategic complementarities and endogenous choice to import intermediate inputs. The model predicts that fi rms with high import shares and high market shares have low exchange rate pass-through. Second, we test and quantify the theoretical mechanisms using Belgian fi rm-product-level data with information on exports by destination and imports by source country. We confi rm that import intensity and market share are the prime determinants of pass-through in the cross-section of fi rms. A small exporter with no imported inputs has a nearly complete pass-through of over 90 percent, while a fi rm at the 95th percentile of both import intensity and market share distributions has a pass-through of 56 percent, with the marginal cost and markup channels playing roughly equal roles. The largest exporters are simultaneously highmarket-share and high-import-intensity fi rms, which helps explain the low aggregate pass-through and exchange rate disconnect observed in the data.

557 citations

Posted Content
TL;DR: The authors investigated empirically the differences in time series behavior of key economic aggregates under alternative exchange rate systems (pegged, floating, and systems such as the EMS) and found little evidence of systematic differences in the behavior of other macroeconomic aggregates or international trade flows.
Abstract: This paper investigates empirically the differences in time?series behavior of key economic aggregates under alternative exchange rate systems. We use a postwar sample of 49 countries to compare the behavior of output. consumption, trade flows, government consumption spending, and real exchange rates under alternative exchange rate systems (pegged, floating, and systems such as the EMS). We then examine evidence from two particular episodes, involving Canada and Ireland, of changes in the exchange rate system. Aside from greater variability of real exchange rates under flexible than under pegged nominal exchange rate systems, we find little evidence of systematic differences in the behavior of other macroeconomic aggregates or international trade flows under alternative exchange rate systems. These results are of interest because a large class of theoretical models implies that the nominal exchange rate system has important effects on a number of macroeconomic quantities.

553 citations

Book ChapterDOI
TL;DR: In this article, the authors present a critical survey and an interpretation of recent exchange rate research, focusing on empirical results for exchange rates among major industrialized countries and examining the issue of speculative bubbles.
Abstract: Publisher Summary This chapter presents a critical survey and an interpretation of recent exchange rate research. It focuses on empirical results for exchange rates among major industrialized countries. The expectations of future exchange rate changes are a key determinant of asset demands, and therefore of the current exchange rate. The expectations variable is relatively straightforward in the conventional monetary models; in theoretical terms , it is determined by the rational expectations assumption, while in empirical terms, it is typically measured by the forward discount or interest differential. The standard empirical implementation of rational expectations methodology infers ex ante expectations of investors from ex post changes in the exchange rate. Unexpected changes in monetary policy frequently cause movements in the exchange rate in the direction hypothesized by the sticky-price monetary model. The chapter presents a survey of the work on exchange rate determination in floating rate regimes. It considers evidence across exchange rate regimes and examines the issue of speculative bubbles. It also reviews some relatively new directions in exchange rate research that focus on the micro-structure of foreign exchange markets.

553 citations

Journal ArticleDOI
TL;DR: The authors found that conditional heteroskedasticity is a characteristic of the true data-generating process, or whether it indicates misspecification associated with linear conditional-mean representations, which bode poorly for recent conjectures that exchange rates contain nonlinearities exploitable for enhanced point prediction.

550 citations


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Performance
Metrics
No. of papers in the topic in previous years
YearPapers
20242
2023899
20222,022
20211,295
20201,609
20191,767