The paper proposes a unified framework to study the dynamics of net foreign assets and exchange rate movements. We show that deteriorations in a country's net exports or net foreign asset position have to be matched either by future net export growth (trade adjustment channel) or by future...

We use a structural vector autoregression model to characterise the aggregate and industry effects of exchange rate movements on the Australian economy. We find that a temporary 10 per cent appreciation of the real exchange rate that is unrelated to the terms of trade or interest rate...

It has been twenty years since Frankel (1979) offered the classic empirical support for the Dornbusch (1976) overshooting model against the simple monetary approach model, and almost that long since Driskill and Sheffrin (1981) uncovered some important inconsistencies between Frankel’s...

We use a dynamic heterogeneous panel model to estimate real equilibrium exchange rates for advanced transition countries. Our method is based on out-of-sample estimations from middle-income and high-income countries, and we use a pooled mean group estimator. We find that exchange rates have...

The paper develops a three-asset-portfolio model to analyse consequences of foreign exchange market operations by Asian central banks on the exchange rates between euro, dollar and yen. Both an analytical as well as a graphical solution is presented. It is found that -- contrary to public belief...

This paper examines the effects of monetary policy in Australia using a small structural vector autoregression model. The model we use is a modification of the small open economy model developed for the G6 economies (the G7 less the United States) by Kim and Roubini (1999). The success of the...

Using weekly data on the positions of different types of participants in currency futures markets we present evidence that suggests speculators are profitable. Across six currencies, speculators’ gross profits are seemingly positive in 60 per cent of weeks. The profits are significant even...

In the second half of 1997 many Asian emerging economies suffered large declines in both their currency and equity markets. This Asian financial turmoil arose primarily from three interrelated sets of factors, namely: shortcomings in the financial sector at a time when global liquidity...

In recent years two classes of switching models have been proposed, the Markov switching models, Hamilton (1989) and the Threshold Auto- Regressive Models (TAR), Lim and Tong (1980). These two models have the advantage of being able to modelize and capture asymmetry, sudden changes and...

Using Granger (1969), Sim (1972) and Geweke et al. (1982) causality tests, this study finds a feedback causal relationship between exchange rate and stock price in Malaysia, whereas a unidirectional causal relationship running from exchange rate to stock price in Thailand. The stock markets of...