Monetary Shocks and Real Exchange Rate Dynamics: a Reappraisal

This paper proposes a two‐country general‐equilibrium model incorporating a tradable sector with pricing‐to‐market as well as a nontradable sector. In that case, real exchange rate fluctuations arise from two sources: changes in the relative price of traded goods, that exemplify deviations from the law of one price, and movements in the relative price of traded to nontraded goods across countries. Our framework sheds light on the propagation mechanisms through which monetary shocks affect the real exchange rate. More specifically, the two components respond in opposite directions to monetary disturbances, which is consistent with data. Besides, the introduction of nontraded goods does not alter the predictive power of monetary shocks because the presence of nontraded goods magnifies the response of the deviation from the law of one price.     

The Threshold Effect of Exchange Rate Volatility on Trade Volume: Evidence from G-7 Countries

Abstract

This paper uses a threshold model to examine a possible threshold effect in the impact of exchange rate volatility on trade volume for the bilateral trade volumes between the US and other G-7 countries. A grid-searching method is used to obtain the threshold points, and time-series econometric techniques are applied to estimate the long run stable relationships as well as short-run dynamics. The results support the existence of nonlinearity in the effect of exchange rate volatility, and indicate that trade volume tends to increase when exchange rate volatility surpasses a certain threshold point.     

Structural Change in Current Account and Real Exchange Rate Dynamics: Evidence from the G7 Countries

Previous studies decompose the current account and the real exchange rate into temporary and permanent shocks and argue that a temporary shock creates the combination of a current account surplus (deficit) and real exchange rate depreciation (appreciation). The present paper extends their framework by examining a possible structural break in current account and real exchange rate dynamics. Using G7 country data for 1980–2007, we find structural changes in two‐variable dynamics for all G7 countries during the 1990s. Temporary shocks have not been the main source of fluctuation in the current account since the 1990s. Our empirical results imply that the conventional mechanism has played a limited role in explaining the dynamics of the two variables.     

Monetary Integration in East Asia: Evidence from Real Effective Exchange Rates

This paper investigates the feasibility of forming a monetary union in East Asia by examining the cointegration and causality of the real effective exchange rates of local currencies. A “pentagon” group of five countries is found—South Korea, the Philippines, Thailand, Indonesia, and Malaysia—which may have potential for success for further monetary integration. Singapore is loosely tied to this group. The Greater China area—China, Hong Kong and Taiwan—does not show any significant degree of integration either internally or externally. Neither a yen bloc nor a US dollar bloc is forming in East Asia.     

关税、货币政策与中国实际均衡汇率

加入WTO后 ,降低进口品关税等措施将影响人民币均衡汇率水平 ,同时开放经济下国内货币政策、财政政策等宏观经济政策调整也会改变均衡汇率水平。本文运用动态一般均衡的方法 ,探讨中国在加入世界贸易组织之后 ,关税税率调整、货币供应量增长率改变、财政政策调整等措施对实际均衡汇率的长期效应。把货币引入生产函数和消费者的效用函数 ,我们扩展了由Turnovsky提出的两商品资本积累模型 ,利用参数赋值(calibration)的方法进行了均衡状态下的比较静态分析。研究发现降低进口品关税使人民币面临贬值压力 ,而政府增加税收 ,减少对贸易品的消费则有利于人民币的保值和升值。实证研究结果表明 :国外实际利率水平下降 ,实际货币供应量增长率降低都将引起人民币均衡汇率贬值。     

Breaking Trend Functions in Real Exchange Rates: Evidence from Seventeen OECD Countries

This paper tests for unit roots in dollar-based and DM-based real exchange rates using quarterly data (from 1957:i to 1995:iv) for seventeen OECD countries. The results show that the unit root hypothesis cannot be rejected even if allowance is made for the possibility of a one-time change in the mean of the series at an unknown point in time. This is evidence against the hypothesis of absolute long-run purchasing power parity over this period.     

Sources of Real Exchange Rate Fluctuations in the Nordic Countries

In an attempt to move beyond the purchasing power parity hypothesis, this paper addresses two issues. The first concerns the causes of movements in real exchange rates. In contrast to the typical result, supply shocks are found to dominate the long-run variance decompositions for each of the four Nordic countries under study. This suggests that productivity developments are the most important determinant of long-run movements in real exchange rates. A second topic is the relative importance of stationary and non-stationary components of real exchange rates. Also in contrast to previous findings, transitory shocks are more important than permanent shocks for three of the four countries.     

The Behaviour of the Real Exchange Rate: Evidence from an Alternative Price Index

Although the long–run purchasing power parity (PPP) hypothesis is expected to hold across tradable goods, all price indices available to researchers for testing the validity of PPP contain some proportion of non–tradable goods prices, which may generate substantial persistence in the real exchange rate. We construct time series for quarterly price indices that minimize the presence of non–tradable goods for six major economies. Applying recently developed nonlinear econometric techniques to the resulting five US dollar real exchange rate series for the recent floating exchange rate regime, we provide evidence that the nonlinear mean reverting properties of these real exchange rate series are stronger than the mean reverting properties of real exchange rate time series constructed using the consumer price index (CPI). In turn, these results have a natural economic interpretation.
(J.E.L.: F31).     

Exploring the Role of the Real Exchange Rate in Australian Monetary Policy

An important issue in small open-economies is whether policymakers should respond to exchange rate movements when they formulate monetary policy. Micro-founded models tend to suggest that there is little to be gained from responding to exchange rate movements, and the literature has largely concluded that such a response is unnecessary, or even undesirable. This paper examines this issue using an estimated model of the Australian economy. In contrast to microfounded models, according to this model policymakers should allow for movements in the real exchange rate and the terms-of-trade when they set interest rates. Further, taking real exchange rate movements into account appears even more important with price level targeting than with inflation targeting.     

Real Exchange Rate Variability: An Empirical Analysis of the Developing Countries Case

The purpose of this paper is to investigate the potential role of monetary and real factors in explaining real exchange rate variability in developing countries. For this purpose two indexes of real effective exchange rate variability that measure short-term and long-term variability were constructed for 30 countries. The results obtained, using a generalized least squares procedures on cross section data, indicate that real exchange rate variability has been affected both by real and monetary factors. In particular it was found that more unstable nominal exchange rate policies were reflected in higher real exchange rate instability in the short-run; more unstable domestic credit policies resulted in higher short-term real exchange rate variability; and more unstable external terms of trade also affected positively the degree of real exchange rate instability. [420]     

Productivity Shocks and Real Effective Exchange Rates

This paper provides new insights into the relationship between exchange rates and productivity developments for European Economies. We focus on the question whether productivity changes have a long‐run impact on real effective exchange rates for a large number of European economies. Focusing on a sample period running from 1995 until 2013, we adopt a cointegrated vector autoregressive approach and distinguish between long‐run equilibrium, short‐run dynamics and long‐run impact of shocks. Our findings show that for several industrialized economies, real effective exchange rates and labor productivity are not related over the long‐run. A possible explanation for this result is that wage developments do not reflect increases in labor productivity to a large degree, which prevents a transmission to the real effective exchange rate through the price channel. The results for Central and Eastern European Countries are more encouraging since a positive impact of labor productivity on real effective exchange rate is frequently observed.     

人民币均衡实际汇率的估计与实际汇率错位的测算

基于均衡实际汇率理论 ,本文应用多种经济计量方法实证分析了自 2 0世纪 50年代中期至 2 0 0 0年期间人民币实际汇率状况 ,估计出人民币均衡实际汇率 ,进而测算了实际汇率错位状况。研究结果表明 :在计划经济时期 ,人民币实际汇率长期被高估。改革开放后 ,均衡实际汇率长期处于贬值状况 ,现实的实际汇率长期被低估。在亚洲金融危机期间 (特别是 1 997和 1 998年 ) ,人民币实际汇率出现了明显的高估。 1 999年这种高估状况得到部分缓解 ;2 0 0 0年出现了根本性好转。在现实中 ,1 999年以后中国出口的快速增长也证实了这一结论。     

Exchange Rate Asymmetry and Flexible Exchange Rates under Inflation Targeting Regimes: Evidence from Four East and Southeast Asian Countries

While many have underscored the role of a flexible exchange rate policy under an inflation targeting (IT) regime, very few studies have examined what actually happens to exchange rate policy once the emerging market announces that it will adopt inflation targeting. The central contention of this paper is that while the adoption of an inflation targeting (IT) policy may lead to more flexible exchange rate movements, for various reasons it is possible that the degree of flexibility will be significantly higher on one side of the market. In this study, we demonstrate that four Asian economies—namely, Indonesia, Korea, the Philippines and Thailand—whom were among the first group of emerging markets to embrace the inflation targeting framework of monetary policy, tend to adopt a form of asymmetrical exchange rate behavior, wherein appreciation pressures are restrained more substantially than depreciation pressures.     

真实汇率与真实利率差异——基于人民币真实汇率的实证研究

本文详细考察了人民币对美元、日元、港币和欧元的双边真实汇率、真实利率差异与进出口之间的统计关系，结果发现：（1）人民币真实汇率与真实利率差异间不存在显著且稳定的统计关系；（2）人民币真实汇率具有较强的“自回归”性，并且存在比较明显的非线性动态调整特征。因此，研究人民币真实汇率自身的特定生成机制可能更具有重要意义。     

Real Wage and Nominal Shock: Evidence from Pacific-Rim Countries

This paper examines aggregate real-wage responses to nominal shocks in four Pacific-rim countries utilizing a vector autoregression (VAR) framework. In this study, positive real-wage responses are found in Japan and New Zealand whereas negative responses are found in Australia and Korea. In the transmission of nominal shocks to real economic activities, the findings show a sticky-price model to be more important in Japan and New Zealand, while a sticky-wage model plays the more dominant role in Australia and Korea.An earlier version of this paper was presented at the 54th International Atlantic Economic Conference in Washington, D.C., October 10–13, 2002. The author would like to thank the conference participants and an anonymous referee for their valuable comments and suggestions. All remaining errors are attributed to the author.     

货币冲击、房地产收益波动与最优货币政策选择

与传统资产定价模型中风险收益权衡关系相悖,我国房地产市场存在投资异象和波动长记忆性特征。文章利用泰勒规则(Taylor Rule)的利率缺口,在剔除市场预期之后测度了中国市场的货币政策冲击,并基于房地产投资回报的时序数据波动聚集性和时变性特征构建GARCH(1,1)-M模型,以此度量我国房地产市场投资收益的波动演变路径,解释了央行实施加息的货币政策后当期房价反而上涨的投资现象。文章还立足于房地产市场参与人的投资特征,从行为金融学的全新研究视角出发,建立包含行为资产定价的动态模型经济系统,研究资产价格波动与最优货币政策选择问题,求得相应闭型解,为实施关注资产价格波动的最优货币政策提供理论基础。     

Exchange Rate Regimes and Inflation: Evidence from India

Abstract

Exchange rate stability is crucial for inflation management as a stable rate is expected to reduce domestic inflation pressures through a ‘policy discipline effect’ – restricting money supply growth, and a ‘credibility effect’ – inducing higher money demand and reduced velocity of money. Alternatively, the ‘impossibility trillema’ of Mundell (1961a Mundell, R. A. (1961a). Capital mobility and stabilization policy under fixed and flexible exchange rates. Canadian Journal of Economics and Political Science, 29, 475–485. doi: 10.2307/139336[Crossref], [Web of Science ®] , [Google Scholar], 1961b Mundell, R. A. (1961b). Flexible exchange rates and employment policy. Canadian Journal of Economics and Political Science, 27, 509–517. doi: 10.2307/139437[Crossref], [Web of Science ®] , [Google Scholar]) predicts that in the presence of an open capital account, a stable exchange rate may lead to lack of control on monetary policy and, hence, higher inflation. Using a monetary model of Inflation, this paper investigates the impact of the ‘empirically-claimed’ de facto stable exchange rate regime on inflation in India during different sub-periods of exchange rate stability. The results show that the impact of exchange rate regime on inflation is not visible in the Indian case, which could be because of the offsetting sterilization policy undertaken by the Reserve Bank of India (RBI) during expansionary money supply growth resulting from its large-scale intervention to even out exchange rate volatility.     

Nonlinear Exchange Rate Adjustment in the Enlarged Eurozone: Evidence and Implications for Candidate Countries

This paper sheds light on the importance of the validity of PPP hypothesis for the accessing process of the candidate countries towards EMU. The evidence of nonlinear adjustment in real exchange rates suggests the estimation of a nonlinear SETAR model. While linear half‐life estimates are biased upward (five years on average), SETAR half‐life estimates imply a faster reverting process (1.5 years on average). Moreover, we found that TPI‐based real exchange rates are more appropriate than CPI‐based real exchange rates in testing for PPP hypothesis. For the cluster of EMU countries and for the pre‐EMU period, our nonlinear model confirms stationarity for the majority of the TPI‐based real exchange rates with half‐life estimates less than a year.     

Is There a Link Between Exchange Rate Pass-Through and the Monetary Regime: Evidence from Sub-Saharan Africa and Latin America

This paper investigates the relationship between the monetary regime: pegged, currency board, dollarization, and the exchange rate pass-through for a sample consisting of 15 Sub-Saharan Africa countries and 12 Latin American countries. The research findings about pass-through rates will shed light on the feasibility of a monetary union for Sub-Saharan Africa. The inclusion of the latter country group was deemed desirable to explore pass-through behavior in several monetary regime options not often used in Sub-Saharan Africa.

Nonlinear Exchange Rate Adjustment and the Monetary Model

Although the empirical literature has delivered evidence in favor of nonlinearities in nominal and real exchange rate adjustment, the corresponding mechanisms with respect to the relationship between nominal exchange rates and fundamentals in general have rarely been put under any close scrutiny. This paper extends the work of other authors, who estimate exponential smooth transition autoregressive models to deviations of the exchange rate from monetary fundamentals. Using monthly data from 1976:01 to 2010:12 for the USA, UK, and Japan, this paper first adopts a cointegrated vector autoregression (VAR) framework to test for the multivariate validity of the monetary model by applying restrictions on the long‐run relationships. Then, nonlinear vector error correction models are estimated to tackle the question of whether the adjustment of the nominal exchange rate with respect to those relationships follows a nonlinear path.