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,...

Along the lines of the treatment effects literature, this paper empirically revisits the issue of the so-called “intervention effect”, i.e., the effectiveness of official foreign exchange intervention on the movement of the exchange rate. We extended in a continuous treatment setting the...

The literature on uncovered interest rate parity (UIP) shows two empirical puzzles. One is the failure of UIP, and the other is the unstable coefficients in the UIP regression. We propose a time-varying coefficients model with stochastic volatility and US structural shocks (TVC-SVX) to study how...

Although EME central banks actively intervene in currency markets, there is a long-running debate as to its effectiveness in affecting exchange rates. In this study, we use unique daily data on currency interventions in Mongolia to analyze the impact of these interventions on the changes in the...

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...

In this article we study the impact of real effective exchange rate misalignments, based on determinants, including different types of foreign capital inflows, on GDP growth in the EU. This can provide a useful contribution to understanding the causal link between inflows, real effective...

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...

We investigate the link between real exchange rates and sectoral total factor productivity measures for countries in the Eurozone. Real exchange rate patterns closely accord with an amended Balassa-Samuelson interpretation, both in cross-section and time series. We construct a sticky price...

At the aggregate level, the evidence that deviations from purchasing power parity (PPP) are too persistent to be explained solely by nominal rigidities has long been a puzzle (Rogoff, 1996). Another puzzle from the micro price evidence of the law of one price (LOP), which is the basic building...

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...