Exchange Rate Dynamics Under Alternative Intervention Rules PDF Download
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Author: Fidelina B. Natividad
Publisher:
ISBN:
Category : Exchange
Languages : en
Pages : 28
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Author: Fidelina B. Natividad
Publisher:
ISBN:
Category : Exchange
Languages : en
Pages : 28
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Author: Mahir Binici
Publisher:
ISBN:
Category : Banks and banking, Central
Languages : en
Pages : 42
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Author: Maurice Obstfeld
Publisher:
ISBN:
Category : Foreign exchange
Languages : en
Pages : 40
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Book Description
This paper studies exchange rate behavior in models with moving long-run equilibria incorporating alternative price-adjustment mechanisms.The paper demonstrates that price-adjustment rules proposed by Mussa andby Barro and Grossman yield models that are empirically indistinguishable from each other. For speeds of goods-market adjustment that are "too fast," the Barro-Grossman rule appears to induce instability; but we argue that when the ruleis interpreted properly, models incorporating it are dynamically stable regardless of the speed at which disequilibriumis eliminated. The Barro-Grossman pricing scheme is shown to be a natural generalization, to a setting of moving long-run equilibria, of less versatile schemes proposed in earlier literature on exchange rate dynamics.
Author: Maurice Obstfeld
Publisher:
ISBN:
Category :
Languages : es
Pages : 174
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Author: Gustavo Adler
Publisher: International Monetary Fund
ISBN: 1484328779
Category : Business & Economics
Languages : en
Pages : 38
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We study exchange rate dynamics under cooperative and self-oriented policies in a two-country DSGE model with unconventional monetary and exchange rate policies. The cooperative solution features a large exchange rate adjustment that cushions the impact of negative shocks and a moderate use of unconventional policy instruments. Self-oriented policies (Nash equilibrium), however, entail limited exchange rate movements and an aggressive use of unconventional policies in both countries. Our results highlight the role of international policy cooperation in allowing the exchange rate to play the traditional role of shock absorber.
Author: Romain Lafarguette
Publisher: International Monetary Fund
ISBN: 1513569406
Category : Business & Economics
Languages : en
Pages : 33
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This paper presents a rule for foreign exchange interventions (FXI), designed to preserve financial stability in floating exchange rate arrangements. The FXI rule addresses a market failure: the absence of hedging solution for tail exchange rate risk in the market (i.e. high volatility). Market impairment or overshoot of exchange rate between two equilibria could generate high volatility and threaten financial stability due to unhedged exposure to exchange rate risk in the economy. The rule uses the concept of Value at Risk (VaR) to define FXI triggers. While it provides to the market a hedge against tail risk, the rule allows the exchange rate to smoothly adjust to new equilibria. In addition, the rule is budget neutral over the medium term, encourages a prudent risk management in the market, and is more resilient to speculative attacks than other rules, such as fixed-volatility rules. The empirical methodology is backtested on Banco Mexico’s FXIs data between 2008 and 2016.
Author: Giuseppe Bertola
Publisher:
ISBN:
Category : Equilibrium (Economics)
Languages : en
Pages : 40
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Author: Maurice OBSTFELD
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Author: Yeongseop Rhee
Publisher:
ISBN:
Category :
Languages : en
Pages : 490
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Author: Ching-chong Lai
Publisher:
ISBN:
Category : Foreign exchange
Languages : en
Pages : 13
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