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: This article examined the predictive performance of four structural exchange rate models using both parametric and nonparametric techniques and found that error correction terms can explain exchange rate movements significantly better than a no change forecast for a subset of the models and currencies.
410 citations
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TL;DR: In this paper, the authors explored the validity of this view using weekly stock return data on 320 industry pairs in six countries from 1975 to 1997, and found that common shocks to industries across countries" are more important than competitive shocks.
Abstract: It is widely accepted that, for some industries, competition across countries is" economically important and that this competition is strongly affected by exchange rate changes." This paper explores the validity of this view using weekly stock return data on 320 industry pairs" in six countries from 1975 to 1997. It is found that common shocks to industries across countries" are more important than competitive shocks. Weekly exchange rate shocks explain almost" nothing of the relative performance of industries. Using returns measured over longer horizons the importance of exchange rate shocks increases slightly and the importance of common shocks" to industries increases more substantially. Both industry and exchange rate shocks are more" important for industries that produce goods traded internationally, but the importance of these" shocks is economically small for these industries as well.
409 citations
Posted Content•
TL;DR: In this article, a cross-generational framework for analyzing currency crises is proposed, which draws from both the early first-generation work and the more recent second-generation approach, emphasizing the important role of speculators and recognizing that the government's commitment to a fixed exchange rate is constrained by other policy goals.
Abstract: In the 1990s, currency crises in Europe, Mexico and Southeast Asia have drawn worldwide attention to speculative attacks on government-controlled exchange rates. To improve our understanding of these events, researchers have undertaken new theoretical and empirical work. In this paper, we provide some perspective on this work and relate it to earlier research in the area. Then we derive the optimal commitment to a fixed exchange rate and propose a common framework for analyzing currency crises that draws from both the early first-generation work and the more recent second-generation approach. The cross-generational framework stresses the important role of speculators and also recognizes that the government's commitment to a fixed exchange rate is constrained by other policy goals. In the final section we study the crisis prediction literature and find that some crises may be particularly difficult to predict using currently popular methods.
401 citations
TL;DR: The authors examined whether the real exchange rates of commodity-exporting countries and the real prices of their commodity exports move together over time using International Monetary Fund (IMF) data on the world prices of 44 commodities and national commodity export shares.
401 citations
01 Jan 2004
TL;DR: In this article, the authors used long-term data to test UIP using interest rates on longer-maturity bonds for the Group of Seven countries and found that the long-horizon regressions yield much more support for UIP-all of the coefficients on interest differentials are of the correct sign, and almost all are closer to the UIP value of unity than to zero.
Abstract: Uncovered interest parity (UIP) has been almost universally rejected in studies of exchange rate movements. In contrast to previous studies, which have used short-horizon data, we test UIP using interest rates on longer-maturity bonds for the Group of Seven countries. These long-horizon regressions yield much more support for UIP-all of the coefficients on interest differentials are of the correct sign, and almost all are closer to the UIP value of unity than to zero. We then use a macroeconomic model to explain the differences between the short- and long-horizon results. Regressions run on model-generated data replicate the important regularities in the actual data, including the sharp differences between short- and long-horizon parameters. In the short run, the failure of UIP results from the interaction of stochastic exchange market shocks with endogenous monetary policy reactions. In the long run, in contrast, exchange rate movements are driven by the "fundamental," leading to a relationship between interest rates and exchange rates that is more consistent with UIP.
401 citations