This study re-examines the hypothesis that exchange-rate variability is another factor contributing to inflation variability. The analysis uses cross-country data for 41 countries over the current floating exchange-rate era. It employs the instrumental variable estimator, Emery's (1993)...

Kuznets' inverted-U hypothesis implies that economic growth worsens income inequality first and improves it later at a higher stage of economic development. In addition to economic growth, other factors such as population growth, resource endowment, price instability, openness, currency...

Devaluation is said to redistribute income from the poor, who have a high Marginal Propensity to Consume (MPC) to the rich, who have a low MPC. Assuming the high MPC group to be unskilled labour and the low MPC group to be skilled labour, we investigate the impact of currency depreciation on...

In a recent article, with a strong theoretical argument but poor empirical support, military spending was identified to be a determinant of real exchange rate or a factor causing the PPP to deviate from equilibrium exchange rate. The poor empirical results were mostly due to a small number of...

Over the last three decades, the Turkish economy has experienced severe macro-shocks, among which depreciation of the Turkish lira is the most noticeable one. The Turkish lira (TL) has depreciated from 13 TL per US dollar in 1973 to more than 1.5 million TL per dollar today. It is expected that...

Cointegration analysis is often used in empirical studies of Purchasing Power Parity (PPP) to test whether there is a long-run relationship among countries' bilateral exchange rates and price levels. But the presence of a cointegrated relationship is not enough to support PPP, as other...

A group of studies have shown that in less developed countries, Purchasing Power Parity (PPP) theory is supported more often when black market exchange rates rather than official rates are used in the testing procedure. They have all relied upon linear Augmented Dickey-Fuller (ADF) test applied...

Few studies in the literature have argued that inflationary effects of devaluation redistribute income from workers to producers. By using cross-sectional data from 24 countries, this paper provides an empirical support for the theoretical arguements that indeed, devaluations have unequalizing...

In this note we employ two procedures to determine whether the adjustment of international reserves is in real or nominal terms. Using panel data from 17 DCs and 16 LDCs, we show that adjustment of actual reserves to their desired level is indeed in nominal terms.

Due to intervention in the foreign exchange market, any pressure on the external account of a country could be absorbed either by a change in reserves or by a change in the exchange rate. In this paper we employ Girton and Roper's EMPM model to investigate the experience of G7 countries. The...