Using a unique dataset on daily foreign exchange intervention and a new methodological framework of a latent factor model of central bank intervention, this paper addresses the effects of intervention in an emerging market. Events in financial markets from 2002 to 2010 provide a natural...

A fivefold increase in central bank foreign reserves across the globe over the past fifteen years has prompted the question of whether this constitutes a new form of mercantilism. According to this view, countries accumulate foreign reserves in order to support export promotion by influencing...

The value of the US dollar is of major importance to the world economy. Global liquidity has grown sharply in recent years with growing importance of China's money supply to global liquidity. We develop out-of-sample forecasts of the US dollar exchange rate value using US and non-US global data...

A relatively recent approach to examining the currency-equity return relationship argues that the portfolio rebalancing activities of investors gives rise to an Uncovered Equity Parity condition (UEP), whereby higher relative equity returns in one country are associated with a currency...

This paper quantifies the relative contribution of domestic, regional and international factors to the fluctuation of domestic output in six key Latin American (LA) countries: Argentina, Bolivia, Brazil, Chile, Mexico and Peru. Using quarterly data over the period 1980:1-2003:4, a multi-variate,...

The paper studies exchange rate implications of trend inflation within a two-country New Keynesian (NK) model under incomplete international financial markets. A NK Phillips curve generalized by trend inflation with a positive long-run mean implies an expectational difference equation of...

The business cycles of advanced economies are synchronized. Standard macro models fail to explain that fact. This paper presents a simple model of a two-country, two-traded-good, complete-financial-markets world in which country-specific productivity shocks generate business cycles that are...

This paper conducts general equilibrium (GE) estimation to evaluate the empirical contributions of macroeconomic shocks in explaining the exchange rate disconnect, excess volatility, and the uncovered interest parity (UIP) puzzles. We embed stochastic volatilities and limits-to-international...

Using annual data over 1966-2014 from the Citizenship and Immigration statistics archives of Canada, we investigate how the funds brought into Canada by immigrants, affects the real effective exchange rate (REER) of Canada. We employ the ARDL bounds testing (Pesaran, Shin and Smith, 1999) and...

Standard macro models cannot explain why real exchange rates are volatile and disconnected from macro aggregates. Recent research argues that models with persistent growth rate shocks and recursive preferences can solve that puzzle. I show that this result is highly sensitive to the structure of...