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The Price Theory of Money, Prospero's Liquidity Trap, and Sudden Stop: Back to Basics and Back

Calvo, Guillermo - National Bureau of Economic Research (NBER) - 2012

Fiat money contains the seeds of its own destruction. It has no intrinsic value and, yet, it can be exchanged for valuable consumption and production goods. As Hahn (1965) shows, this situation puts fiat money's market value or liquidity premium at the brink of collapse. In this paper I will...

Persistent link: https://www.econbiz.de/10010796587

Noisy Information, Distance and Law of One Price Dynamics Across US Cities

Crucini, Mario John; Shintani, Mototsugu; Tsuruga, Takayuki - National Bureau of Economic Research (NBER) - 2012

Using micro price data across US cities, we provide evidence that both the volatility and persistence of deviations from the law of one price (LOP) are positively correlated with the distance between cities. A standard, two-city, equilibrium model with time-varying technology under homogeneous...

Persistent link: https://www.econbiz.de/10009652890

What Does Futures Market Interest Tell Us about the Macroeconomy and Asset Prices?

Hong, Harrison; Yogo, Motohiro - National Bureau of Economic Research (NBER) - 2011

Economists have traditionally viewed futures prices as fully informative about future economic activity and asset prices. We argue that open interest could be more informative than futures prices in the presence of hedging demand and limited risk absorption capacity in futures markets. We find...

Persistent link: https://www.econbiz.de/10008805020

Volatility and Pass-through

Berger, David; Vavra, Joseph S. - National Bureau of Economic Research (NBER) - 2013

What drives countercyclical volatility? A large literature has documented that many economic variables are more disperse in recessions, but this could either occur because shocks get bigger or because firms respond more to shocks which are the same size. Existing evidence that the dispersion of...

Persistent link: https://www.econbiz.de/10010950688

Accounting for Persistence and Volatility of Good-Level Real Exchange Rates: The Role of Sticky Information

Crucini, Mario John; Shintani, Mototsugu; Tsuruga, Takayuki - National Bureau of Economic Research (NBER) - 2008

Volatile and persistent real exchange rates are observed not only in aggregate series but also in the individual good level data. Kehoe and Midrigan (2007) recently showed that, under a standard assumption on nominal price stickiness, empirical frequencies of micro price adjustment cannot...

Persistent link: https://www.econbiz.de/10005778645

Lost in Transit: Product Replacement Bias and Pricing to Market

Nakamura, Emi; Steinsson, Jon - National Bureau of Economic Research (NBER) - 2009

The microdata underlying U.S. import and export price indexes exhibit frequent product turnover and highly rigid prices. As a consequence, 40% of products are replaced before a single price change is observed and 70% are replaced after two price changes or less. An aggregate price index that...

Persistent link: https://www.econbiz.de/10005050107

Economic Growth and Real Exchange Rate: An Overview of the Balassa-Samuelson Hypothesis in Asia

Ito, Takatoshi; Isard, Peter; Symansky, Steven - National Bureau of Economic Research (NBER) - 1997

The paper tests the Balassa-Samuelson hypothesis (rapid economic growth is accompanied by real exchange rate appreciation because of differential productivity growth between tradable and nontradable sectors) using data of the APEC economies. Japan, Korea, Taiwan and, to a lesser extent, Hong...

Persistent link: https://www.econbiz.de/10005714427

Is Bad News About Inflation Good News for the Exchange Rate?

Clarida, Richard H.; Waldman, Daniel - National Bureau of Economic Research (NBER) - 2007

an inflation surprise and the nominal exchange rate can tell us something about how monetary policy is conducted …. Specifically, we show that 'bad news' about inflation -- that it is higher than expected -- can be 'good news' for the nominal … exchange rate -- that it appreciates on this news -- if the central bank has an inflation target that it implements with a …

Persistent link: https://www.econbiz.de/10005714830

Explaining the Duration of Exchange-Rate Pegs

Klein, Michael W.; Marion, Nancy P. - National Bureau of Economic Research (NBER) - 1994

This paper is a theoretical and empirical investigation into the duration of exchange-rate pegs. The theoretical model considers a policy-maker who must trade off the economic costs of real exchange- rate misalignment against the political cost of realignment. The optimal time to spend on a peg...

Persistent link: https://www.econbiz.de/10005828508

Anticipations of Foreign Exchange Volatility and Bid-Ask Spreads

Wei, Shang-Jin - National Bureau of Economic Research (NBER) - 1994

The paper studies the effect of the market's perceived exchange rate volatility on bid-ask spreads. The anticipated volatility is extracted from currency options data. An increase in the perceived volatility is found to widen bid-ask spreads. The direction of the effect is consistent with an...

Persistent link: https://www.econbiz.de/10005828545

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