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Exchange Rate and Inflation Under Weak Monetary Policy : Turkey Verifies Theory

Gürkaynak, Refet S.; Kısacıkoğlu, Burçin; Lee, … - 2022

experiment of the past decade, stemming from a belief of the government that higher interest rates cause higher inflation … eventually a negative coefficient on inflation in the policy rule. In such an environment, was the exchange rate still a random … walk? Was inflation anchored? Does the “standard model” suffice to explain the broad contours of macroeconomic outcomes in …

Persistent link: https://www.econbiz.de/10014083478

The Worst of Both Worlds : Fiscal Policy and Fixed Exchange Rates

Born, Benjamin - 2019

Under fixed exchange rates, fiscal policy is an effective tool. According to classical views because it impacts the real exchange rate, according to Keynesian views because it impacts output. Both views have merit because the effects of government spending are asymmetric. A spending cut lowers...

Persistent link: https://www.econbiz.de/10012859987

Fundamental and non-fundamental equilibria in the foreign exchange market : a behavioural finance framework

De Grauwe, Paul; Dieci, Roberto; Grimaldi, Marianna - 2005

We develop a simple model of the exchange rate in which agents optimize their portfolio and use different forecasting rules. They check the profitability of these rules ex post and select the more profitable one. This model produces two kinds of equilibria, a fundamental and a bubble one. In a...

Persistent link: https://www.econbiz.de/10010261158

The overvaluation of Renminbi undervaluation

Cheung, Yin-Wong; Chinn, Menzie D.; Fujii, Eijii - 2007

We evaluate whether the Renminbi (RMB) is misaligned, relying upon conventional statistical methods of inference. A framework built around the relationship between relative price and relative output levels is used. We find that, once sampling uncertainty and serial correlation are accounted for,...

Persistent link: https://www.econbiz.de/10010264069

A role model for China?: exchange rate flexibility and monetary policy in Japan

Schnabl, Gunther; Danne, Christian - 2007

Few papers have tried to project how Chinese monetary policy will behave under flexible exchange rates. As Japan provides an important role model for China, this paper studies the role of the yen/dollar exchange rate for Japanese monetary policy after the shift of Japan from a fixed to a...

Persistent link: https://www.econbiz.de/10010264171

Exchange rates dynamics in a target zone: a heterogeneous expectations approach

Bauer, Christian; De Grauwe, Paul; Reitz, Stefan - 2007

The target zone model of Krugman (1991) has failed empirically. In this paper, we develop a model of the exchange rate with heterogeneous agents in a free floating and a target zone regime. We show that this simple model mimics the empirical puzzles of exchange rates: excessive volatility, fat...

Persistent link: https://www.econbiz.de/10010264194

Monetary policy, model uncertainty and exchange rate volatility

Markiewicz, Agnieszka - 2010

This paper proposes an explanation of the shifts in the volatility of exchange rate returns that relies on standard present value exchange rate models. Agents are uncertain about the true data generating model and deal with the model uncertainty by making inference on the models and their...

Persistent link: https://www.econbiz.de/10010266075

A reappraisal of the border effect on relative price volatility

Cheung, Yin-Wong; Lai, Kon-Sun - 2006

Engel and Rogers (1996) find that crossing the US-Canada border can considerably raise relative price volatility and that exchange rate fluctuations explain about one-third of the volatility increase. In re-evaluating the border effect, this study shows that cross-country heterogeneity in price...

Persistent link: https://www.econbiz.de/10010274494

Exchange rate misalingment estimates: Sources of differences

Cheung, Yin-wong; Fujii, Eiji - 2011

We study the differences of currency misalignment estimates obtained from alternative datasets derived from two International Comparison Program (ICP) surveys. A decomposition exercise reveals that the year 2005 misalignment estimates are substantially affected by the ICP price revision....

Persistent link: https://www.econbiz.de/10010277395

A Jackknife Model Averaging Analysis of RMB Misalignment Estimates

Cheung, Yin-Wong - 2019

We adopt the Jackknife Model Averaging (JMA) technique to conduct a meta-regression analysis of 925 renminbi (RMB) misalignment estimates generated by 69 studies. The JMA method accounts for model selection and sampling uncertainties, and allows for non-nested model specifications and...

Persistent link: https://www.econbiz.de/10012861432