nep-ifn New Economics Papers
on International Finance
Issue of 2008‒05‒17
seven papers chosen by
Yi-Nung Yang
Chung Yuan Christian University

  1. Exchange Rate Pass-Through And Monetary Policy By Frederic S. Mishkin
  2. Empirical Market Microstructure: An Analysis Of The Brl/Us$ Exchange Rate Market Using High-Frequency Data By Laurini, Márcio P. & Furlani, Luiz G. C. & Portugual, Marcelo S.
  3. Exchange Rate and Fundamentals: The Case of Brazil By Marcelo L. Moura, Adauto R. S. Lima e Rodrigo M. Mendonça
  4. Managing Capital Flows: The Case of the Philippines By Yap, Josef T.
  5. A new unit root test against ESTAR based on a class of modified statistics By Kruse, Robinson
  6. The Determinants of Exchange Rate Regimes in Emerging Market Economies By Mehmet Guclu
  7. Technology Capital and the U.S. Current Account By Ellen R. McGrattan; Edward C. Prescott

  1. By: Frederic S. Mishkin
    Abstract: This paper discusses what recent economic research tells us about exchange rate pass-through and what this suggests for the control of monetary policy. It first focuses on exchange rate pass-through from a macroeconomic perspective and then examines the microeconomic evidence. In light of this evidence, it then discusses the implications of exchange rate movements on the conduct of monetary policy.
    JEL: E52 F41
    Date: 2008–05
  2. By: Laurini, Márcio P. & Furlani, Luiz G. C. & Portugual, Marcelo S.
    Date: 2008–10
  3. By: Marcelo L. Moura, Adauto R. S. Lima e Rodrigo M. Mendonça
    Date: 2008–10
  4. By: Yap, Josef T.
    Abstract: <p>During the past five years or so, most East Asian economies including the Philippines experienced a rising level of foreign exchange reserves and rapidly appreciating currencies both in nominal and real terms. One cause has been the resurgence of capital flows, which makes the issue of how to manage them relevant. However, the experience with regard to capital flows among East Asian economies is mixed and the level of capital flows to the region is proportionally less than that prior to the 1997 crisis.</p> <p>Another reason is the rise in current account surpluses. The Philippines has experienced both a return of capital inflows and a more favorable current account balance, with the latter largely due to remittances from overseas workers. However, like many other regional currencies, the appreciation of the peso is not commensurate to movements of the BOP accounts. Currencies in the region are reacting primarily to the general weakness of the US dollar, and global uncertainties have contributed to weak investment which in turn is another major reason behind the current account surplus of several economies including the Philippines. Policy measures at the domestic level can focus on reviving private investment, particularly channeling overseas remittances to more productive investment. Meanwhile, East Asian financial and monetary cooperation can also result in a unified front aimed at overhauling the unipolar global financial system.</p>
    Keywords: foreign exchange inflows, currency appreciation, unipolar global financial system
    Date: 2008
  5. By: Kruse, Robinson
    Abstract: This paper proposes a new unit root test against a non-linear exponential smooth transition autoregressive (ESTAR) model. The new test is build upon the non-standard testing approach of Abadir and Distaso (2007) who introduce a class of modified statistics for testing joint hypotheses when one of the alternatives is one-sided. In a Monte Carlo study the popular Dickey-Fuller type test proposed by Kapetanios et al. (2003) is compared with the new test. The results suggest that the new test is generally superior in terms of power. An application to a real effective exchange rate underlines its usefulness.
    Keywords: Unit root test, Nonlinearities, Smooth transition
    JEL: C12 C22 F31
    Date: 2008–04
  6. By: Mehmet Guclu (Department of Economics, Ege University)
    Abstract: The choice of exchange rate regime has become one of the most important issues one more time in many economies after the financial crises in recent years. In the wake of the financial crises, many countries, especially emerging market economies, opted for floating exchange rate regimes by forsaking the pegged regimes. Consequently, an old debate on the choice and determinants of exchange rate regimes has been triggered. Economists have started to debate what appropriate exchange rate regime for an economy is. When the tendency in recent years is taken into consideration, the choice of exchange rate regime of countries, especially emerging economies, needs to be analyzed. To do this, in this paper, we attempt to uncover how emerging market economies choose their exchange rate regimes. In other words, we try to find the economic and political factors underlying the choice of exchange rate regimes. The study includes 25 emerging market economies over the period 1970-2006. We use random effect ordered probit model in order to find the long run economic and political determinants of exchange rate regimes for emerging economies. The determinants of both the de jure and de facto exchange regimes are empirically analyzed in the paper.
    Keywords: Exchange Rate Regime, Emerging Market
    JEL: E42 F31 F33 F41
    Date: 2008–05
  7. By: Ellen R. McGrattan; Edward C. Prescott
    Abstract: The U.S. Bureau of Economic Analysis (BEA) estimates the return on investments of foreign subsidiaries of U.S. multinational companies over the period 1982--2006 averaged 9.4 percent annually after taxes; U.S. subsidiaries of foreign multinationals averaged only 3.2 percent. Two factors distort BEA returns: technology capital and plant-specific intangible capital. Technology capital is accumulated know-how from intangible investments in R&D, brands, and organizations that can be used in foreign and domestic locations. Used abroad, it generates profits for foreign subsidiaries with no foreign direct investment (FDI). Plant-specific intangible capital in foreign subsidiaries is expensed abroad, lowering current profits on FDI and increasing future profits. We develop a multicountry general equilibrium model with an essential role for FDI and apply the BEA's methodology to construct economic statistics for the model economy. We estimate that mismeasurement of intangible investments accounts for over 60 percent of the difference in BEA returns.
    JEL: F32
    Date: 2008–05

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