Currency crises tend to be regional; they affect countries in geographic proximity. This suggests that patterns of international trade are important in understanding how currency crises spread, above and beyond and macroeconomic phenomena. We provide empirical support for this hypothesis. Using...

A large literature on the appropriate sequencing of financial liberalization suggests that removing capital controls prematurely may contribute to currency instability. This paper investigates whether legal restrictions on international capital flows are associated with greater currency...

Irrespective of whether discretion or commitment to a binding rule guides the conduct of monetary policy, the existence of a direct exchange rate channel in the Phillips Curve causes the behavior of the key economic variables in the open economy to be dramatically different from that in the...

In this paper, we examine the foreign exchange exposure of a sample of U.S. and Japanese banking firms. Using daily data, we construct estimates of the exchange rate sensitivity of the equity returns of the U.S. bank holding companies and compare them to those of a sample of Japanese banks. We...

Why are some currency crises followed by economic contractions while others are not? This paper is an attempt at answering this query. In particular, we investigate two closely related questions. First, we explore whether there is a difference in the output effects of a devaluation during...

This article formulates and tests for New Zealand a model of exchange rate determination focusing on non-tradeable goods and terms-of-trade shifts. We emphasize the equilibrium properties of this framework and, in this context, estimate an error correction model where adjustment in response to...

The paper is concerned with exchange rate instability, by which we mean large changes in exchange rates. The paper has two objectives. First, we search for plausible determinants of currency crashes. To do this we examine annual panel data for a large sample of developing countries. The work is...

This paper reviews recent progress in applying information-theoretic tools to long-standing exchange rate puzzles. I begin by distinguishing the traditional public information approach (e.g., monetary models, including new open-economy models) from the newer dispersed information approach. (The...

This paper studies the process of capital inflow management and speculative inflows for countries pursuing the joint goals of monetary and exchange rate management. We introduce a sticky-price model with imperfect asset substitutability in which a central bank engages in costly sterilization to...

A sticky price monetary model (Frankel, 1979) of exchange rates is applied to quarterly data on seven currencies: the Indonesian rupiah, Korean won, Malaysian ringgit, Philippine peso, Singapore dollar, Taiwanese dollar and the Thai baht. The model proves empirically unsuccessful, except in the...