FLUCTUATING EXCHANGE RATES AND THE PRICING OF EXPORTS

The purpose of this paper is to examine the invoicing decision of an exporter under a system of pegged exchange rates and a system of freely fluctuating rates. With pegged exchange rates, the exporter may equivalently invoice in its home currency or in the currency of its foreign clients, since the two prices are related by the pegged rate. With fluctuating rates, however, the choice of an invoicing strategy is important and will affect the level of trade. The optimal prices with each strategy are compared, and the exporter's responses to governmental policy instruments are characterized.     

Exchange rate regimes and the cross-country distribution of the 1997 financial crisis

We study variations in the severity of the 1997 financial crisis in a sample of 25 developing countries. We use both currency depreciation and stock market returns as crisis measures. Our key findings are that countries that started 1997 with an exchange rate peg experienced significantly greater currency depreciation and significantly lower stock returns than would be predicted from the levels of various macroeconomic indicators.     

ECONOMIC EFFECTS OF CURRENCY UNIONS

We develop a new instrumental-variable (IV) approach to estimate the effects of different exchange rate regimes on bilateral outcomes. The basic idea is that the characteristics of the exchange rate between two countries are partially related to the independent decisions of these countries to peg—explicitly or de facto—to a third currency, notably that of a main anchor. This component of the exchange rate regime can be used as an IV in regressions of bilateral outcomes. We apply the methodology to study the economic effects of currency unions. The likelihood that two countries independently adopt the currency of the same anchor country is used as an instrument for whether they share a common currency. We find that sharing a common currency enhances trade, increases price comovements, and decreases the comovement of real gross domestic product shocks. ( JEL C3, F3, F4)     

INDETERMINACY AND VOLATILITY OF EXCHANGE RATES UNDER IMPERFECT CURRENCY SUBSTITUTION

We know that when currencies are perfect substitutes, exchange rates could become indeterminate. We show that even when currencies are less than perfect substitutes exchange rates could display volatility unrelated to economic fundamentals. With increases in currency substitution: (1) the exchange rate becomes more sensitive to changes in economic fundamentals, increasing its volatility; (2) the exchange rate could become indeterminate, and it is more likely to become so if governments pursue similar monetary policies; (3) currencies with high nominal interest rates would decline significantly and the exchange rate becomes more sensitive to changes in the supply of those currencies.     

Financial forecasts during the crisis: Were experts more accurate than laypeople?

The main goal of this paper was to examine the accuracy and confidence of financial forecasts during the 2009/2010 crisis. The study was carried out in February 2009 in Poland. The participants represented two groups: financial analysts and laypeople (people without knowledge or skills in finance). All participants were asked to forecast future stock market performance and foreign exchange rates. Additionally, they marked their confidence on a 100-point scale. The results showed that the forecasts significantly differed from the real values. In forecasting both the stock market and the currency exchange market, the prediction error significantly differed from zero. Even if the participants were optimistic in making the directional stock market forecasts, they were pessimistic when making point index predictions, which suggests a judgmental paradox. The experts were slightly better than the non-experts in predicting the stock market. However, their accuracy was generally not better in the exchange market forecasts. The next step of the analysis focused on the confidence factor. The results of this part of the research showed that the laypeople were less confident than the experts in all the judgments.     

DO TERRORIST ATTACKS IMPACT EXCHANGE RATE BEHAVIOR? NEW INTERNATIONAL EVIDENCE

This study examines whether terrorist attacks affect bilateral exchange rates. Using historical 10‐minute exchange rate data for 21 countries' currency vis‐à‐vis the U.S. dollar, we show that exchange rate returns of all countries are statistically significantly affected by terrorist attacks. Some exchange rates appreciate and some depreciate following a terrorist attack, some currencies experience exchange rate reversals while others experience a persistent effect. Generally, the effect declines but persists as terrorist attacks become stale information. (JEL F31, F37)     

AN INTERNATIONAL ARBITRAGE PRICING MODEL WITH PPP DEVIATIONS

This paper derives an intertemporal, international arbitrage pricing model that relaxes more assumptions than previous asset pricing paradigms. The analysis shows how risk, risk premia, and the translation of these variables between all real and nominal numeraires depend upon a small number of stochastic state variables that define the economy's production and credit opportunities. When the model is applied to the forward exchange market, it highlights the potentially central role of real exchange rates in determining the evolution of forward exchange risk premia.     

Estimates of Money Demand Functions for Estonia

This paper examines the money demand function of Estonia in the period 1995–2006. Since Estonia has a currency board system, euro area interest rates are taken into account. We apply different cointegration procedures like the Engle–Granger, the dynamic OLS, and the Johansen procedure to estimate the long-run relationship among money, output, and interest rates. The results show that it is difficult to find a cointegrating relationship for the broad money aggregate M2. For the preferred relationship including euro area money market rate and euro area bond rate a dynamic equation is estimated. This dynamic equation is stable for the whole period. The change of the anchor curreny in the currency board and the accession to the European Union do not alter the relationship.      

Do natural resource revenues lower government reliance on seigniorage? The role of exchange rate policy

The study investigates how the degree of exchange rate management conditions the relationship between seigniorage and governments’ natural resource revenues using a sample of 140 countries over the period from 1971 to 2012. It also disaggregates natural resource revenues to investigate if this relationship holds across the various types of natural resources. The main approach is to estimate dynamic panel data interaction models. The study finds that under exchange rate regimes characterized as fixed or of limited flexibility an increase in natural resource rents is associated with an increase in seigniorage. Under crawling currency bands and managed floating, an increase in natural resource rents has little association with seigniorage. Under exchange rate regimes permitting greater exchange rate flexibility, greater natural resource rents allow less reliance on seigniorage. Additionally, the direct relationship between natural resource rents and seigniorage is driven mostly by oil and natural gas.     

浮动汇率下的埃及进出口贸易

1999年，埃经济发生危机，外汇短缺，政府无法坚守埃镑的原汇率，从今年1月起，实行浮动汇率制。但从埃外贸现状和实行浮动汇率制的背景看，近期内埃外贸赤字无法改变，但随着汇率的稳定、外贸结构的调整，政府政策的正确干预，必会从浮动汇率制上获益。     

RISK, TRANSACTIONS CHARGES, AND THE MARKET FOR FOREIGN EXCHANGE SERVICES

This paper suggests that transactions charges in foreign exchange markets, rather than being solely brokerage fees, represent exchange rate uncertainty in periods of great fluctuations by including remuneration for the assumption of risk by foreign exchange dealers. Since most of the cost of exchange rate uncertainty may be largely endogenously included in the foreign exchange markets, attempts to examine the efficient market hypothesis in these markets should most appropriately include specific consideration of transactions costs. There appears to be empirical support for the premise that transactions charges are positively related to exchange rate risk, and, as well, inclusion of contemporaneous bid-ask spreads into the interest parity schedule leaves few unexplained profits from dollar-pound covered interest arbitrage during the 1970's and underscores the notion of classifying periods by degree of turbulence in analyzing covered interest arbitrage.     

EXCHANGE RATE SYSTEMS AND INVESTOR PREFERENCES

This paper investigates whether or not floating exchange rates add an undesirable level of risk to international investment positions. For investors holding currencies, we find that fixed exchange rates are preferred to floating exchange rates, which supports the often-argued case that floating exchange rates do excessively increase the riskiness of investment. However, in the more realistic case of investors holding foreign securities, we find that floating exchange rates are preferred to fixed exchange rates; that is, we find that floating exchange rates have not added an undesirable level of risk to international investment positions.     

美国离岸金融及其对人民币国际化的启示

美元真正取代英镑成为国际储备货币,这主要取决于美元的稳定性、美国的经济实力和金融市场发展的成熟。而美元离岸市场的发展,更促进了美元作为一种主导型的国际储备货币,在国际贸易和金融交易中发挥主导作用。人民币要成为一种国际性货币,中国就必须要有一个开放性的、发展很广很深的、流动性很好的金融市场,这样才能保证人民币成为一种国际性货币。人民币国际化,主要是交易结算发展的过程,其次是人民币境外市场发展的过程。现在最主要的还是增加跨境人民币的流动性,对人民币从境外流向境内的控制可以谨慎一点;但境内人民币流向境外对境内的冲击要小,所以可以放得更宽一点。在这种情况下,最好的模式就是通过自贸区来发展,把一些管制的措施放得更快、更广。     

Time to Exchange the Exchange‐Rate Regime: Are Hard Pegs the Best Option for Low‐Income Countries?

This paper revisits the debate over the most appropriate exchange‐rate regime for low‐income countries. The debate revolves around: the effect of the exchange‐rate regime on macroeconomic management, particularly inflation; the links between the exchange‐rate regime and vulnerability to crisis (often in the form of twin banking and currency crises); and the effect on international trade and competitiveness. The theoretical and empirical literature and the views of international organisations are reviewed. It is concluded that a hard peg might constitute the most appropriate regime but this is contingent on a number of important preconditions. This view, supported by recent empirical research, is shown to be at odds with the current orthodoxy of international organisations such as the IMF.     

FEDERAL DEFICITS, MACRO-STABILIZATION GOALS, AND FEDERAL RESERVE BEHAVIOR

The effects of federal deficits on Federal Reserve behavior as proxied by changes in the growth rate of the monetary base are analyzed in this study. Multivariate Granger-causality tests are employed in the analysis. The deficit measure that is the focus of the analysis is the change in the real market value of privately held federal debt. The tests indicate that the deficit Granger-causes the monetary base. Additionally, concerns for financial market stability, real output, and exchange rate movements in the period of floating rates also affect Federal Reserve behavior.     

Suppressing Asset Price Inflation: The Confederate Experience, 1861–1865

Confederate asset price stabilization policies appear to have increased the velocity of circulation and counterproductively channeled inflationary pressures into other areas of the economy. Three successive monetary reforms encouraged holders of Treasury notes to exchange these notes for bonds by imposing deadlines on their convertibility. We show that Confederate funding acts aimed at precipitating the conversion of currency into bonds did temporarily suppress currency depreciation. These acts also triggered upsurges in commodity prices, however, because note holders rushed to spend the currency before their exchange rights were reduced.     

The Relationship Between Military Spending and Black Market Premium in Greece: An ARDL Approach

Recently, there are a few empirical studies relating to the military spending and other macro variables such as real exchange rate, unemployment rates, investment rates, budget, and inflation rates. We examine the relationship between military spending and black market premium, in the Greece using the autoregressive distributed lag approach for the time period 1954?C1998. Our results implied that higher military spending leads to higher black market premium and we concluded that while military spending does not Granger cause black market premium in the short run, black market premium does Granger cause military spending in the short run. When we examine the long-run results, ELC model implies that almost 30?% of the disequilibrium of the previous year??s shocks adjusts back to the long run equilibrium.     

Has the Youth Labor Market in Japan Changed? An Event History Analysis Approach

Abstract: This paper examines whether the Japanese youth labor market has become more unstable, particularly since the 1990s. To address this problem, I suggest that we consider the transition rate of job exit to be the benchmark of instability in the labor market and focus on workers' career histories until they reach the age of 34 years. This paper presents six hypotheses that explain the instability of the youth labor market as follows: the total increase in the job-exit transition rate, the higher risk of job exit for provisional workers, the increase in the number of provisional workers, the increasing transition rate for provisional workers and stable regular workers, the impact of firm size, and the impact of the collapse of the bubble economy. I present the summary statistics of job exit rates and the results of the Cox partial likelihood estimation models. A conspicuous phenomenon of the 1990s entailed an increasing number of provisional workers who ran a higher risk of job exits compared to regular workers. However, the job exit transition rates are generally stable. Moreover, the transition rates for regular female workers have decreased since the 1980s due to the increasing realization of gender equality in society. Although partial likelihood estimation states that firm size and the type of officer concerned (public/private) had significant effects on the transition rates, their effect did not intensify after the collapse of the bubble economy. In sum, the evidence that the Japanese youth labor market changed in the 1990s is limited.     

THE CHANGING INFLUENCE OF MONEY AND MONETARY POLICY ON EXCHANGE RATES

This paper focuses on an old issue—the linkage between money announcements and the exchange rate. It shows that the magnitude of the time-varying response of the spot exchange rate to an unanticipated money announcement is mainly driven by agents' expectations of the Federal Reserve's time-varying response to the deviation of the actual money supply from a prespecified target. The inference is, the magnitude of the exchange rate's response to economic announcements depends on market participants' expectations about the announcements and the Fed's probable monetary policy response.     

Do Migrant Remittances Cause Dutch Disease in Nigeria?

Statistics show that remittances inflow to Nigeria grew from US$3,000,000 in 1978 to over US$22 billion in 2017. Theoretically, such a large inflow of foreign currency into an economy may lead to Dutch diseases. This study, therefore, investigated whether the massive inflow of remittances into the economy causes Dutch disease. Given that the model had both I(0) and I(1) variables, ARDL/Bound testing methodology was used with annual data from 1981 to 2016. The ARDL result showed that migrant remittances have a significant positive effect on the real effective exchange rate in Nigeria in the long run. Specifically, a one per cent increase in the inflows of remittances increases the real effective exchange rate of Naira by 0.44 per cent in the long run. This appreciation of the Nigerian Naira relative to other competing nations encourages import and discourages export, leading to the Dutch disease effect.