Financial Instability under a Flexible Exchange Rate*

Many governments in developing countries contemplate the possibility of increasing the flexibility of their exchange rates despite having accumulated substantial dollar‐denominated debt. Using a model of corporate dollar debt in which the future exchange rate is uncertain, this paper studies the financial risks that might arise as a consequence of increased exchange rate flexibility. Since a firm may default on its debt either because its dollar income is too low or because investors refuse to roll over its debt, the measure of the overall risk of default should take into account both factors, as well as their interaction. Solving the model for the no‐default rational expectations equilibrium, we find that a small risk of insolvency may bring about a substantial risk of illiquidity.     

Strategic Foreign Direct Investment and Exchange‐Rate Uncertainty

We investigate how exchange‐rate uncertainty affects the foreign direct investment decision of a risk‐neutral multinational firm (MNF). We assume the firm can open plants, each with decreasing average costs, in two different countries. Under certainty, the MNF would open only one plant. We demonstrate that with sufficient exchange‐rate volatility, the firm can increase expected profits by opening several plants. We also show that if the MNF faces a competitor in the foreign market, the exchange risk, by inducing the MNF to open plants in both markets, may prevent entry by the local competitor.     

Exchange Rate Pass-Through in Vertically Related Markets

The paper provides a theoretical framework which addresses exchange rate pass-through within the setting of vertically related markets. In particular, foreign firms' price adjustment in response to an exchange rate shock is evaluated. This permits study of the importance of cost effects of the exchange rate shock. Recent empirical evidence indicated the relevance of these cost effects. It is shown that one can decompose the effects of an exchange rate shock on the final goods market into direct and indirect components. The indirect effect works through the input market. The degree of pass-through then depends on the relative importance of direct and indirect effects, which in turn depends on the nature of vertical structures and strategic firm behavior. It is shown that the institutional aspects of vertically related markets play a role in explaining incomplete price adjustments in both intermediate and final goods markets and the failure of PPP in the short run.     

大宗商品价格变化与汇率波动的动态关系——兼论中国外汇储备结构调整

2008年全球金融危机以来,大宗商品价格变化与一些大宗商品输出国货币汇率的波动态势较为一致。这是偶然巧合还是必然联系?本文利用VEC向量误差修正模型等对相关数据进行了实证分析后表明,2008年以来,大宗商品价格上升对澳大利亚、加拿大等大宗商品输出国货币汇率有正面推动作用。基于此,本文建议:为降低外汇储备风险,中国需要适时增加大宗商品输出国货币和资产在外汇储备中的比重,同时相应减持美元和美元资产。     

Asymmetric Exchange Rates and Unofficial Exchange Rate Interventions: The Case of South Korea

Applying Milton Friedman's ‘plucking’ model of output fluctuations, we investigate the behavior of the Korean won/dollar exchange rate using a state-space model with Markov switching, which incorporates both symmetric and asymmetric shocks. We find that the Korean won/US dollar exchange rate rarely falls below its trend, but is plucked upward from time to time by transitory shocks. This asymmetry suggests that the monetary authority unofficially intervenes in the foreign exchange market to support its own target level from below. Further evidence from changes in reserve assets indirectly supports our finding.     

Measuring Exchange Rate Uncertainty: The Case of the Australian Dollar 1969 to 1987

In this article indices of exchange rate uncertainty are measured from the perspective of potential impacts on trade flows. Empirical evidence based on movements in the Australian dollar spot rates and forward rates indicates that there has been an increase in currency risk between 1969 and 1987, which is not surprising given the progressive relaxation of the exchange rate regime during this period. More surprising is the finding that exchange rate uncertainty indices have risen relative to domestic financial price uncertainty indices. This would not have been expected to occur if increased currency risk had been solely due to growing instability of the underlying economic environment. However, since there is evidence that currency risk has been offset by domestic risk, the risk burden of diversified international traders may not have been adversely affected.     

The Risk Premium, Exchange Rate Expectations, and the Forward Exchange Rate: Estimates for the Yen–Dollar Rate

The hypothesis that the forward rate is an unbiased predictor of the future spot rate has been rejected in many empirical studies. The rejection of this hypothesis could occur because market behavior is inconsistent with rational–expectations or because there exists a risk premium. Equations describing the forward premium and the change in the exchange rate are estimated jointly, and tests of both the rational–expectations and no–risk–premium hypotheses are conducted. Empirical estimates, obtained using quarterly data for the yen–dollar exchange rate, reject the rational–expectations hypothesis and suggest that there exists a time–varying risk premium.     

Exchange Rate Exposure of Chinese Firms at the Industry and Firm Level

This study investigates the exchange rate exposure of Chinese firms at the industry and firm level based on the conventional capital asset pricing model (CAPM) framework. At the industry level, the dynamic conditional correlation MGARCH (DCC MGARCH) estimates demonstrate that the market model and three‐factor model are appropriate for exposure measurements, and industry returns are more likely to be exposed to unanticipated changes in the real exchange rate and the trade‐weighted effective exchange rate, particularly for manufacturing industries. At the firm level, although the seemingly unrelated regression (SUR) estimates vary across markets, it is apparent that there is a relationship between firm size and exposure effects, which also show that lagged exchange rate changes have significant exposure effects on firm returns. This study finally suggests that non‐financial firms should set up special commissions to hedge currency risks of their future cash flows.     

汇率制度能影响外汇市场压力和央行干预吗

按照Stavarek（2007）的方法和标准,分别计算了2002年1月到2011年12月期间人民币对美元的外汇市场压力及中央银行干预指数。结果显示,人民币实行参考一篮子货币的汇率制度与盯住美元的汇率制度相比,不仅没有减轻外汇市场压力,反而加大了外汇干预压力。汇率制度不是影响外汇市场压力的决定因素,但不同的汇率制度却对我国央行外汇市场干预程度产生了较大的影响。在人民币实行参考一篮子货币的汇率制度下,央行干预程度明显降低,汇率决定的市场化程度相应提高。     

新汇率体制下中国上市公司外汇风险暴露研究

本文以沪市180指数样本股作为研究对象,通过测量上市公司经营活动产生的现金流相对贸易加权汇率指数及我国主要贸易伙伴货币汇率变化的敏感度,来考察我国企业的外汇风险暴露问题。研究显示,我国上市公司总体外汇风险暴露程度比较高,公司规模与短期外汇风险成正比关系,外国控股程度的高低对风险暴露则没有明显的影响。     

The Performance of Exchange Rate Forecasts

Since the floating of the Australian dollar the forecasting of exchange rate movements has become more difficult and received much more attention. As a result, some participants in the foreign exchange market have, on a number of occasions, come under criticism for their inability to predict exchange rate movements. This article seeks to evaluate these criticisms through an examination of exchange rate forecasts made by market participants (as published in the Australian Financial Review from March 1985 to December 1985). The accuracy of the $A/US$ forecasts is compared with that of forecasts generated from a number of simple forecasting rules as well as forecasts of the US$/Yen exchange rate. In general, the simple forecasting rules provide superior forecasts to those provided by the individual market participants. However, under some criteria, the mean of the individual participants' forecasts may be preferred to these simple forecasting rules. Further, the comparison of the US$/Yen forecasts with the $A/US$ forecasts shows the former to be generally more accurate.     

Export,Exchange Rate Risk and Hedging: The Duopoly Case

Abstract. This paper studies a Cournot duopoly in international trade with firms exposed to exchange rate risk. A hedging opportunity is introduced by a forward market on which one firm can trade the foreign currency. We investigate two settings: First, we assume that hedging and output decisions are taken simultaneously. It is shown that hedging is exclusively done for risk‐managing reasons as it is not possible to use hedging strategically. Second, the hedging decision is made before the output decisions. We show that hedging is not only used to manage the risk exposure but also as a strategic device.     

Exchange Rates and Long‐Term Bonds*

There is tentative evidence to suggest that the well‐documented empirical failure of uncovered interest parity (UIP) is confined to short‐term interest rates. However, tests of UIP for long‐term bonds are thwarted by various data problems. These data problems can be avoided by focusing on short investments in long‐term bonds. This paper concerns the relationship between changes in the US dollar–Deutsche Mark exchange rate and returns to short investments in US and German long‐term government bonds. The hypothesis that expected returns to investments in bonds denominated in the two currencies are equal is not rejected, and the estimated slope coefficients are positive. For corresponding short‐term interest rates, the typical finding of negative and large Fama coefficients is confirmed. We conclude that it is the maturity of the asset, rather than the investment horizon, that matters for the results.     

Factors Determining the Exchange Rate Movement under a Partial Capital Mobility Regime

The study examines the rupee–US dollar exchange rate (Rs/$) behaviour in the presence of increasing and ample capital inflows in the post-reform period in India. Using monthly data (1994:4 to 2007:8) the study estimates a basic exchange rate model in a time series framework in order to assess the relative significance of capital inflows in the presence of interest rate, inflation rate and growth rate differentials and other factors (forward exchange rate/expected exchange rate) in influencing the rupee–dollar exchange rate behaviour. It finds the dominance of foreign institutional investments affecting the rupee–dollar exchange rate and, to a certain extent, it is seen that the influence of the growth rate differential affects the exchange rate behaviour in India.     

汇率与股价波动研究——基于中国与日本高频数据的ARCH检验

次贷危机发生前，汇率与股指存在ARCH效应，且均有不对称信息的冲击，波动存在持续性的影响；次贷危机发生后，汇率与股价都不存在ARCH效应，系统性风险和非系统性风险暴露出来使得汇率对股市的波动影响降低，从而促进投资者风险得到有效对坤。     

Analysis of Output Fluctuations in Taiwan: An Application of the IS–MP–AS Model

Extending the IS–MP–AS model, this paper finds that real GDP in Taiwan is positively affected by real depreciation and stock values and negatively associated with the government deficit/GDP ratio, the U.S. federal funds rate, and the expected inflation rate. Therefore, current large and rising government deficits, recent appreciation of the New Taiwan dollar, and gradual increases in the federal funds rate would hurt real output in Taiwan.     

Forward Speculation, Excess Returns, and Exchange Rate Variability: The Role of Risk Premiums

The paper reconsiders the unbiasedness hypothesis in the foreign exchange market. Within the context of a conventional model of exchange rates, risk premium shocks are constrained to have no permanent effects on the spot rate. Using monthly data from the post-floating period, the paper estimates risk premiums for the dollar rates of the yen, mark, and pound. Risk premium innovations seem to explain a modest proportion of short-term variability of exchange rate changes and excess returns. However, risk premiums may explain serial correlations in excess returns.     

Nonlinear Mean-Reversion in Real Exchange Rates: Toward a Solution To the Purchasing Power Parity Puzzles

We fit nonlinearly mean-reverting models to real dollar exchange rates over the post-Bretton Woods period, consistent with a theoretical literature on transactions costs in international arbitrage. The half lives of real exchange rate shocks, calculated through Monte Carlo integration, imply faster adjustment speeds than hitherto recorded. Monte Carlo simulations reconcile our results with the large empirical literature on unit roots in real exchange rates by showing that when the real exchange rate is nonlinearly mean reverting, standard univariate unit root tests have low power, while multivariate tests have much higher power to reject a false null hypothesis.     

汇率与股价变动关系:基于汇改后数据的实证研究

研究我国2005年7月汇率制度改革后汇率与股市的关系及其传导机制,有助于深刻认识金融市场联动特征,对于防范金融市场风险和完善我国资本市场、外汇市场等的改革具有重要的理论和实践意义。本文实证发现了汇率和股价存在着长期均衡的协整关系;从长期来看,两者关系符合流量导向模型,上证指数受到汇率长期影响,从短期来看,股市和汇市存在着交互影响,汇率变化影响股指变动有时滞。运用滚动窗口的Granger检验和加入其他重要宏观变量的多变量协整检验,本文证明了这种长期关系具有较强的稳健性。进一步从板块指数与汇率的关系来看,房地产、金融、民航、石化、钢铁指数均与汇率存在着长期的协整关系,汇率变化是这些板块指数的Granger原因。最后,本文对实证结果做出分析并指出了相应的政策含义。     

涉外企业的汇率风险度量

汇率风险日益成为影响涉外企业价值的重要因素,然而与对利率风险、信用风险的度量研究相比,汇率风险的度量研究相对滞后。本文通过尝试着把主要用来衡量利率风险的VaR方法运用于对涉外企业的汇率风险衡量,以期来推动理论界对汇率风险度量问题的关注。