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on International Finance |
| By: | Christian Dreger; Eric Girardin |
| Abstract: | This paper examines whether the behaviour of the real exchange rate is associated with a particular regime for the nominal exchange rate, like fixed and flexible exchange rate arrangements. The analysis is based on 16 annual real exchange rates and covers a long time span, 1870-2006. Four subperiods are distinguished and linked to exchange rate regimes: the Gold Standard, the interwar float, the Bretton Woods system and the managed float thereafter. Panel integration techniques are applied to increase the power of the tests. Cross section correlation is embedded via common factor structures. The evidence shows that real exchange rates properties are affected by the exchange rate regime, although the impact is not very strong. A unit root is rejected in both fixed and flexible exchange rate systems. Regarding fixed-rate systems, mean reversion of real exchange rates is more visible for the Gold Standard. The half lives of shocks have increased after WWII, probably due to a higher stickiness of prices and a lower weight of international trade in the determination of exchange rates. Both for the periods before and after WWII, half lives are lower in flexible regimes. This suggests that the nominal exchange rate plays some role in the adjustment process towards PPP. |
| Keywords: | Real exchange rate persistence, exchange rate regime, panel unit roots |
| JEL: | F31 F37 F41 |
| Date: | 2007 |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwwpp:dp746&r=ifn |
| By: | Panagiotis Liargovas; Dimitrios Dapontas |
| Abstract: | This paper seeks to explain the causes of turbulence in foreign exchange markets in selected transition Economies (Albania, Belarus, Bulgaria, Croatia, FYROM, Moldova, Romania and Ukraine), by using a set of CATREG models and introducing explanatory variables, not directly associated with the official exchange rate. It considers the influence of macroeconomic, social development, institutional and external variables, by providing an integrated framework beyond first, second or third generation previous released theoretical models, bringing a new innovative and wider approach to the field. |
| Keywords: | currency crisis, transition economies, Eastern European countries |
| Date: | 2007 |
| URL: | http://d.repec.org/n?u=RePEc:uop:wpaper:0011&r=ifn |
| By: | Paulo Gala |
| Date: | 2007 |
| URL: | http://d.repec.org/n?u=RePEc:anp:en2007:037&r=ifn |
| By: | Fernando Alexandre (NIPE and niversidade do Minho); Pedro Bação (GEMF and Faculdade de Economia, Universidade de Coimbra); John Driffill (Birkbeck College, University of London) |
| Abstract: | We evaluate the macroeconomic performance of different monetary policy rules when there is exchange rate uncertainty. We do this in the context of a non-linear rational expectations model. The exchange rate is allowed to deviate from its fundamental value and the persistence of the deviation is modeled as a Markov switching process. Our results suggest that taking into account the switching nature of the economy is important only in extreme cases. |
| Keywords: | Exchange Rates, Monetary Policy, Markov Switching |
| JEL: | E52 E58 F41 |
| Date: | 2007 |
| URL: | http://d.repec.org/n?u=RePEc:gmf:wpaper:2007-09&r=ifn |
| By: | Luiz Fernando de Paula |
| Date: | 2007 |
| URL: | http://d.repec.org/n?u=RePEc:anp:en2007:016&r=ifn |
| By: | Evans, Kevin (Cardiff Business School); Speight, Alan E H |
| Abstract: | The short-run reaction of Euro returns volatility to a wide range of macroeconomic announcements is investigated using five-minute returns for spot Euro-Dollar, Euro-Sterling and Euro-Yen exchange rates. The marginal impact of each individual macroeconomic announcement on volatility is isolated whilst controlling for the distinct intraday volatility pattern, calendar effects, and a latent, longer run volatility factor simultaneously. Macroeconomic news announcements from the US are found to cause the vast majority of the statistically significant responses in volatility, with US monetary policy and real activity announcements causing the largest reactions of volatility across the three rates. ECB interest rate decisions are also important for all three rates, whilst UK Industrial Production and Japanese GDP cause large responses for the Euro-Sterling and Euro-Yen rates, respectively. Additionally, forward looking indicators and regional economic surveys, the release timing of which is such that they are the first indicators of macroeconomic performance that traders observe for a particular month, are also found to play a significant role. |
| Keywords: | Intraday volatility; macroeconomic announcements; exchange rates |
| JEL: | G12 E44 E32 |
| Date: | 2007–09 |
| URL: | http://d.repec.org/n?u=RePEc:cdf:accfin:2007/4&r=ifn |