Exchange Rate Trends Research Articles

Does the choice of a nominal exchange rate regime matter for real exchange rate movements? Comments on Orlowski

Orlowski's paper is an important contribution to the literature on monetary policy in transition economies. It studies how variant monetary policies conducted in leading transition economies, Hungary, Poland, and the Czech Republic, have affected the real exchange rate trends differently. The sample period covers the post-95 period. Orlowski's findings indicate that the choice of a nominal exchange rate regime does matter for the behaviour of real economic variables.

Real Exchange Rate Trends and Growth: A Model of East Asia

In contrast to the Balassa–Samuelson hypothesis, many fast‐growing Asian countries have experienced little trend real exchange rate appreciation, or even depreciation. Moreover, their long‐run real exchange rate trend seems to be dominated by movements in traded goods prices. A model is developed which is consistent with these observations. As in the Balassa–Samuelson model, productivity growth is concentrated in the traded goods sector. Nevertheless the real exchange rate may exhibit trend depreciation, driven by persistent deviations in the price of traded goods from those in the reference country. The key feature of the model is the presence of endogenous productivity growth in the distribution services sector.

Deviations of Exchange Rates from Purchasing Power Parity: A Story Featuring Two Monetary Unions

We examine the mean-reverting properties of real exchange rates, by comparing the unit root properties of a group of international real exchange rates with two groups of intra-national real exchange rates. Strikingly, we find that while the international real rates taken as a group are mean-reverting, the intra-national rates are not. This is consistent with the view that while monetary shocks may be mean-reverting over the medium-term, underlying real factors do generate long-term trends in real exchange rates.

Is Foreign Exchange Risk Priced in the Japanese Stock Market?

The exchange rate is an important variable that affects international competitiveness and performance of Japanese firms. We use an unconditional and a conditional multi-factor asset pricing model to examine whether exchange risk is recognized and priced in the Japanese stock market. The results indicate that the exchange risk is generally priced in Japan. More specifically, we provide evidence, in the unconditional model, that the exchange risk is priced in both weak and strong yen periods, when the bilateral yen/U.S. dollar exchange rate measure is used. The results are more mixed when the trade-weighted exchange rate is used. For the conditional model, the exchange risk is priced regardless of the exchange rate measure used. The combined evidence from the two models suggests an interesting observation about the role of the secular exchange rate trend in shaping the perception of exchange risk in the Japanese capital markets.

Stochastic trends and economic fluctuations in a large open economy

This study examines the role of stochastic trends in real exchange rates and foreign output in explaining economic fluctuations in the United States. While many of the results are consistent with recent closed-economy studies, the evidence shows that external shocks have significant short-run effects on economic fluctuations, even in a large country. A real appreciation of the dollar leads to permanent decreases in net exports and temporary decreases in output. Permanent shocks to real exchange rates have surprisingly large effects on output over the course of the normal business cycle.

Deviations of Exchange Rates from Purchasing Power Parity: A Story Featuring Two Monetary Unions

We examine the mean-reverting properties of real exchange rates, by comparing the unit root properties of a group of international real exchange rates with two groups of intra-national real exchange rates. Strikingly, we find that while the international real rates taken as a group are mean-reverting, the intra-national rates are not. This is consistent with the view that while monetary shocks may be mean-reverting over the medium-term, underlying real factors do generate long-term trends in real exchange rates.

Deviations of Exchange Rates From Purchasing Power Parity: A Story Featuring Two Monetary Unions

We examine the mean-reverting properties of real exchange rates, by comparing the unit root properties of a group of international real exchange rates with two groups of intra-national real exchange rates. Strikingly, we find that while the international real rates taken as a group appear mean-reverting, the intra-national rates are not. This is consistent with the view that while monetary shocks may be mean-reverting over the medium term, underlying real factors do generate long-term trends in real exchange rates.

Common trends in prices and exchange rates. Tests of long-run purchasing power parity

The empirical validity of long-run purchasing power parity is investigated using multi-variate cointegration techniques. Both bilateral and multilateral PPP is examined. The data set is monthly and covers almost 22 years (January 1970–August 1991) for four countries — Germany, Japan, the U.S., and Great Britain. While three cointegrating relations are detected among the set of nominal exchange rates and domestic price levels (or equivalently, there exists a reduced number of common stochastic trends) none of these satisfy the linear constraints implied by PPP. We conclude that neither bilateral nor multilateral PPP can be supported by the behavior of the data.

THE EFFECT OF THE EXCHANGE RATE AND INTERNATIONAL FACTORS ON THE COMPETITIVE POSITION OF SOUTH AFRICAN WHEAT PRODUCERS / DIE EFFEK VAN DIE WISSELKOERS EN INTERNASIONALE FAKTORE OP DIE MEDEDINGENDHEIDSPOSISIE VAN SUID-AFRIKAANSE KORINGPRODUSENTE

The principle for local producers is to be competitive if the playing field is level. In the medium to longer term, it is in the consumer's interest to protect local producers against imports, since locally produced wheat will probably be Competitive with imported wheat in the long run in view of the expected trends in world prices and exchange rates.

An objective Bayesian analysis of common stochastic trends in international stock prices and exchange rates : Gary Koop

An objective Bayesian analysis of common stochastic trends in international stock prices and exchange rates : Gary Koop

An objective Bayesian analysis of common stochastic trends in international stock prices and exchange rates

This paper uses Bayesian methods to analyze unit root and cointegration properties of two different finance data sets. Avoiding the use of subjective prior information, the paper surveys and utilizes several different objective Bayesian methodologies in an investigation of common stochastic trends in international stock markets and in spot and forward exchange rates for several different countries.

Global trends in real exchange rates 1960–1984

During 1960–1984, the real exchange rates of developing countries on average depreciated substantially relative to those of developed countries. There were, however, important differences among developing country groups, as well as differences between official and black market rate movements. A simple econometric model of the determination of real exchange rates is used to explain the observed trends. The results suggest that forces within developed countries have caused the average shift in the developed-developing country real exchange rate relationship. But the outcome has varied among developing country groups for reasons specific to those groups.

Purchasing Power Parity in the Long Run: A Cointegration Approach

This paper utilizes cointegration analysis to examine purchasing power parity relationships over a long-time horizon. The results indicate that the exchange rate is cointegrated strongly with the wholesale price index ratio and somewhat weakly with the consumer price index ratio. The cointegrating coefficient between the exchange rate and the price ratio is close to one when cointegration is confirmed. The hypothesis that the real exchange rate follows a random walk is rejected in most cases. Finally, a new test for common trends finds no such common trends in exchange rates or price ratios. Copyright 1990 by Ohio State University Press.

El problema del atraso cambiario: consideraciones teóricas y prácticas

​This article considers the prospects for constructing a theoretical framework that allows the author understand the trend of the real exchange rate in Peru since 1989. After discarding the Purchasing Power Parity approach, because of its theoretical flaws and the portfolio approaches, because of their short-run emphasis, the author states the need for a real approach. Based on the Dornbusch, Fischer and Samuelson model he proposes an explanation in term of the interrelation between the sectors producing tradeables and non tradeables goods.

Carbon dioxide exchange rates in wheat canopies. Part I. Influence of canopy geometry on trends in leaf area index, light interception and instantaneous exchange rates

This field study investigated the influence of different canopy structures on seasonal trends in leaf area index (LAI), light interception, and instantaneous net carbon dioxide (CO 2) exchange rates (NCE) in wheat. Winter wheat ( Triticum aestivum L. cv. Newton) was planted at the Evapotranspiration Research Site (Unit 2) located 14 km south of Manhattan, KS (39°09′N, 96°37′W) in north-south and east-west row orientations with 0.18-, 0.35-, 0.53-, and 0.71-m row spacings during the 1982–1983 and 1983–1984 growing seasons. Seeding rates were 67, 34, 22, and 17 kg ha −1 for the 0.18-, 0.35-, 0.53-, and 0.71-m row spacings, respectively. These treatments modified the wheat canopy structure for a comparative study. For both years, the soil type was a Muir silt loam (fine-silty, Mesic, Pachic Haplustoll). All plots were fertilized with 109 kg N ha −1 incorporated prior to planting. Interplant competition reduced the size, tiller number, and above-ground green phytomass for individual plants planted in narrow-spaced rows. However, the total number of plants, tillers, and green phytomass per ground area were greatest in the narrow-spaced rows. Altering canopy structure significantly influenced the seasonal trends in LAI, with larger values occurring in canopies planted in narrow-spaced rows. NCE rates were consistently higher in wheat canopies grown in the narrow-spaced rows (i.e. greater LAI) and decreased with increasing row width (i.e. smaller LAI). LAI was an adequate indicator of potential NCE rates during the vegetative and reproductive stages of growth. However the maximum NCE rates remained at seasonal high levels during the senescent phase when the LAI dropped below the canopy light saturation threshold (i.e. LAI of 2.5–3.5) suggesting that stem and heads play a vital role in NCE rate during senescence. NCE were consistently greater in the north-south oriented canopies when compared to the east-west ones, particularly at high zenith angles during clear days. However, row orientation did not significantly influence seasonal phytomass production. Narrow-spaced rows obtained canopy closure early in the spring which significantly increases light interception efficiency and NCE rates resulting in higher phytomass production.

The effects of exchange rate trends and volatility on export prices: Industry examples from Japan, Germany, and the United States

Die Wirkungen von Trends und Schwankungen der Wechselkurse auf die Exportpreise: Beispiele aus der Industrie Japans, der Bundesrepublik und der Vereinigten Staaten. - Wie unterscheiden sich Trends und Schwankungen der Wechselkurse, denen sich die Exporteure der einzelnen LAnder gegenubersehen, und wie beeinflussen sie deren Exportpreispolitik? Die Verfasserin untersucht Daten uber die Transaktionspreise der Exporte von funf stark disaggregierten Industrieprodukten, welche aus den USA, Japan und der Bundesrepublik ausgefuhrt wurden. Sie ermittelt, da\ die deutschen Unternehmen geringere TrendverAnderungen und Schwankungen der Wechselkurse auf ihren ExportmArkten erfahren haben als die amerikanischen und japanischen Exporteure dieser Produkte. Indessen scheinen die deutschen Exporteure in ihrer Preispolitik besonders empfindlich auf TrendverAnderungen und Schwankungen der Wechselkurse zu reagieren. Fur die Preisgestaltung der US-Firmen sind weder der Trend noch die Schwankungen des Dollarkurses besonders wichtig. Die japanischen Firmen werden am meisten von den Schwankungen und den Trendbewegungen des Yen betroffen. Les effets des tendances et des fluctuations des taux de change sur les prix a l’exportation: des examples de l’industrie au Japon, dans la RFA et aux Etats-Unis. - De quelle maniere different la tendance et la fluctuation des taux de change parmi les exportateurs de divers pays et de quelle faCon influencent-elles les strategies des prix a l’exportation? L’auteur analyse les donnees sur les prix de transaction pour des exportations des cinq produits industriels tres desaggreges exportes des Etats-Unis, du Japon et de la RFA. Elle a trouve que les exportateurs allemands ont appris sur leurs debouches des mouvements de tendance et des fluctuations des taux de change qui sont moins accentues que ceux des exportateurs americains et japonais pour les mEmes produits. Cependant les exportateurs allemands semblent reagir le plus sensiblement a ces deux facteurs. Ni le mouvement de tendance du dollar ni sa fluctuation ne sont tres importants pour le comportement des entreprises americaines dans leur politique de prix. Les entreprises japonaises sont les plus influencees par la fluctuation et le mouvement de tendance du yen. Los efectos de tendencias en el movimiento de las tasas de cambio y la volatilidad sobre los precios de exportacion: ejemplos de industrias del Japon, Alemania y los Estados Unidos. - ?Como difieren las tendencias en el movimiento y la volatilidad de las tasas de cambio entre paises exportadores y como afectan estas a las estrategias de precio de exportacion? La autora analiza estadisticas a nivel muy desagregado de los precios para transacciones de exportacion de cinco productos industriales exportados por los Estados Unidos, el Japon y Alemania Occidental. Los resultados demuestran que los exportadores alemanes han experimentado movimientos de tendencia y una volatilidad de las tasas de cambio relativamente menores en sus mercados de destino que los exportadores estadounidenses y japoneses de estos productos. Los exportadores alemanes, empero, parecen ser mas sensitivos frente a estos dos factores en el marco de sus estrategias de precios. Ni la tendencia del movimiento del dolar ni su volatilidad son importantes para la politica de precios de las empresas estadounidenses. Las empresas japonesas resultan ser las mas afectadas por la volatilidad del yen y su tendencia de movimiento.

Differences in income elasticities and trends in real exchange rates

One might expect that differences in income elasticities in trade and/or differences in growth rates among countries would give rise to strong secular trends in real exchange rates; for example, fast-growing countries might need steady depreciation to get the world to accept their growing exports. In fact, however, income elasticities are systematically related to growth rates by the ‘45-degree rule’, under which fast-growing countries appear to face high income elasticities of demand for their exports, while having low income elasticities of import demand. The net effect of this relationship between elasticities and growth rates is that secular trends in real exchange rates are much smaller than one might otherwise have expected: relative PPP holds fairly well. This paper documents the existence of a ‘45-degree rule’, and suggests an explanation in terms of increasing returns and product differentiation.

Comments ‘differences in income elasticities and trends in real exchange rates’ by Paul Krugman

Comments ‘differences in income elasticities and trends in real exchange rates’ by Paul Krugman

Comments ‘differences in income elasticities and trends in real exchange rates’ by Paul Krugman

Comments ‘differences in income elasticities and trends in real exchange rates’ by Paul Krugman

Exchange Rates Influence Softwood Lumber Trade

Abstract Exchange rates influence the softwood lumber trade between the United States and its trading partners. Recent trends in exchange rates for the United States, Canada, and Japan are consistent with an increase in the Canadian share of the U.S. domestic market, a reduction in U.S. exports to Japan, and a relative shift toward a larger Canadian share in the Japanese markets.