RationaleIn Latin America, it is not unusual to see exchange rate depreciations in excess of 20% in a single year. Although depreciation tends to stimulate a country’s net external demand, it does not always lead to increased output. It is worth understanding which channels may explain this...

Real exchange rate (RER) is an important instrument for restoring sustainable economic growth in the small open economy with large export share. RER of Ukrainian currency can be explained within the real business cycle (RBC) framework without any forms of nominal rigidities. Fitting Ukrainian...

We demonstrate that short-run real exchange effective rate changes are dominated by nominal effective exchange rate changes, while inflation rates are sticky and contribute little to short-run real exchange rate changes. These observations allow a rather accurate real-time approximation of the...

We estimate the effects of a negative asymmetric demand shock on the real exchange rate for the euro area vis-à-vis the United States, Canada, and Japan by state-dependent sign-restricted local projection methods. We find a real depreciation when interest rates are not at the ZLB, but also when...

Rational expectations models fail to explain the disconnect between the exchange rate and macroeconomic fundamentals. In line with survey evidence on the behaviour of foreign exchange traders, we introduce model misspecification and learning into a standard monetary model. Agents use simple...

The dollar's dominance as the world's reserve currency was inaugurated at the 1944 Bretton Woods conference where the agreement was signed by the 44 wartime allies, but the dollar's hegemony was solidified in 1971 when US President Nixon cut the dollar's link to gold. True, the fixed exchange...

We analyze the global relationship between oil prices, commodity-specific financial marketshocks and economic activity by means of Structural Vector Autoregressive (SVAR) models for the period 1996 - 2015. For the financial market variables in our model, we use a breakdown of G-20 countries into...

This paper analyzes the price dynamics of Brazilian cities between 1995 and 2012 to identify stylized facts about price convergence, the reversal speed of deviations between relative prices and purchasing power parity (PPP). There is evidence of a strong reduction in the absolute dispersion of...

In this paper we test the purchasing power parity for the post Bretton Woods period for 18 main industrial countries. As base currencies we use alternatively the Deutsche mark, the Japanese yen, and the US dollar. We employ error correction models for single countries and on the level of pooled...