We study the optimal foreign exchange (FX) intervention policy in response to a positive terms of trade shock and associated Dutch disease episode in a small open economy model. We find that during a Dutch disease episode tradable production drops below the socially optimal level, resulting in...

We examine the stability and strength of the relationship between exchange rates and trade over time using three alternative approaches, mitigating the endogeneity of the relation. We find that both exchange rate pass-through and the price elasticity of trade volumes are largely stable over...

This paper tests the hypothesis of ‘commodity currency' on the nuevo sol and, more generally, identifies the drivers of Peru's equilibrium real exchange rate using a cointegration analysis. The results show that export commodity prices do not have a statistically significant impact on Peru's...

Chile offers an example of a country that has overcome the fear of floating by reducing balance sheet mismatches, enhancing financial market development, as well as improving monetary, fiscal, and political institutions, and strengthening policy credibility. Under the floating regime, Chile's...

We assess the competitiveness of Mauritius in recent years using two approaches. First, we estimate the difference between the equilibrium and the actual real exchange rate using four methods: the macroeconomic balance approach, the single-equation fundamentals approach, the capital-enhanced...

This paper presents an empirical analysis of the medium and long-term determinants of the real (effective) exchange rate (RER) of the Bulgarian lev using elements from the natural real exchange rate (NATREX) and the behavioral equilibrium exchange rate (BEER) approaches. The results indicate...

This paper estimates the effect of grants and workers' remittances on Jordan's long-term equilibrium real exchange rate. We estimate an equilibrium path for the Jordanian real exchange rate using the Johansen cointegration methodology over the period 1964 to 2005. Controlling for other...

This paper is a first analysis of daily transactions in the foreign exchange market of Barbados, a small open economy that has had an unchanged peg to the U.S. dollar for over 30 years. As a result of the credibility of the peg, we expect that capital flows will respond to differentials between...

After 25 years, the Colombian authorities decided to abandon the crawling peg exchange rate policy and implement a regime of nominal exchange rate bands. Initial conditions in Colombia contrast sharply with those of other cases in which bands were part of an ongoing effort to reduce high...