Data for the U.S. and the Euro area during the post-Bretton Woods period shows that nominal and real exchange rates are more volatile than consumption, very persistent, and highly correlated with each other. Standard models with nominal rigidities match reasonably well the volatility and...

The paper assesses the extent to which the Group of Seven (G7) has been successful in its management of major currencies since the 1970s. Using an event-study approach, the paper finds evidence that the G7 has been overall effective in moving the U.S. dollar, yen and euro in the intended...

Economic Research Working Paper 9904

All agree partial dollarization or currency substitution is a legacy of past inflation and exchange rate instability. Some argue partial dollarization contributes to exchange rate instability. However, if Central Banks respond to dollarization by lowering money growth and maximizing seigniorage...

Total factor productivity (TFP) falls markedly during financial crises, as we document with recent evidence from Mexico and Asia. These falls are unusual in magnitude and present a difficult challenge for the standard small open economy neoclassical model. We show in the case of Mexico’s...

We examine the effects of foreign currency-indexed debt upon inflationary expectations in Brazil and Mexico. Conjecturing that markets will view increasing overhangs of foreign currency-indexed debt as a commitment technology that fiscally punishes devaluation, we test whether increasing such...

The broadest and most commonly used measure of the cost of living across U.S. cities is the American Chamber of Commerce Research Association (ACCRA) index. This index is used by business and government organizations and the media to rank living standards and real wages across U.S. cities. In...

Engel and West (EW, 2005) argue that as the discount factor gets closer to one, present-value asset pricing models place greater weight on future fundamentals. Consequently, current fundamentals have very weak forecasting power and exchange rates appear to follow approximately a random walk. We...

Several recent papers have found that exogenous shocks to spreads paid in corporate credit markets are a substantial source of macroeconomic fluctuations. An alternative explanation of the data is that spreads respond endogenously to expectations of future default. We use a simple model of bond...

We study the effects of oil-price shocks on the U.S economy combining narrative and quantitative approaches. After examining daily oil-related events since 1984, we classify them into various event types. We then develop measures of exogenous shocks that avoid endogeneity and predictability...