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on International Finance |
| By: | Eric Hillebrand; Gunther Schnabl; Yasemin Ulu |
| Abstract: | We use realized volatility to study the influence of central bank interventions on the yen/dollar exchange rate. Realized volatility is a technical innovation that allows specifying a system of equations for returns, realized volatility, and interventions without endogeneity bias. We find that during the period 1995 through 1999, interventions of the Japanese monetary authorities did not have the desired effect with respect to the exchange rate level and we measure an increase in volatility associated with interventions. During the period 1999 through 2004, the estimations are consistent with successful interventions, both in depreciating the yen and in reducing exchange rate volatility. |
| JEL: | C32 E58 F31 F33 G15 |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_1766&r=ifn |
| By: | William R. Cline |
| Abstract: | In the absence of US fiscal adjustment and a further correction of the dollar, the current account deficit is headed to $1.3 trillion by 2010 (8 to 8.5 percent of GDP) and net US foreign liabilities to over $8 trillion (50 percent of GDP). According to CGD/IIE Senior Fellow William R. Cline, the rising trade deficit and associated borrowing from abroad are now financing a decline in personal saving and a rise in the government deficit. This imbalance will increasingly put the US economy—and the developing countries—at risk. This working paper focuses on the impact that the US external deficit and a possible “hard landing” for the US and world economies will have on developing countries. Cline finds that these countries are at risk since they have relied heavily on a continuing expansion of trade surpluses with the United States as a source of demand. Developing countries with high borrowing abroad are also doubly sensitive to a spike in world interest rates—once directly from higher US interest rates, and once indirectly through higher risk spreads—that might be associated with a hard landing. This Working Paper is based on The United States as a Debtor Nation, a book published in 2005 by the Center for Global Development and the Institute for International Economics. |
| Keywords: | trade deficit, personal savings, world economy, trade surplus |
| JEL: | E21 E0 E4 F4 |
| Date: | 2006–03 |
| URL: | http://d.repec.org/n?u=RePEc:cgd:wpaper:86&r=ifn |