One-sector inter-temporal models of the current account predict that a transitory shock to the terms of trade will lead to improvement in trade balance, while a persistent (or permanent) one could result in trade balance deterioration. This paper reexamines this issue in a two-sector small open...

This paper examines short-run determinants of the U.S. dollar/Malaysian ringgit (USD/MYR) exchange rate based on a simultaneous-equation model. Applying the EGARCH model, the paper finds that the USD/MYR exchange rate is positively associated with the Malaysian real government Treasury bill...

We develop a small open economy model with capital, sticky prices, and a simple form of financial frictions. We compare welfare levels under three alternative rules: a domestic inflation-based Taylor rule, a CPI inflation-based Taylor rule, and an exchange rate peg. We show that the superiority...

This study empirically examines the effects of real exchange rate volatility on India's exports using time series data for the period from 1970-71 to 2011-12. This study uses a simple rolling standard deviation as a measure of exchange rate volatility and implements the Johansen cointegration...

This study has found an empirical support of Purchasing Power Parity (PPP) theory for an East Asia transition economy – Cambodia. It is based on the results of cointegration among KHR/USD, Cambodia CPI, and world CPI over the monthly period May 2001-February 2009. This finding is useful...

Abstract This paper studies the regional stock market integration process. First, we estimate the time-varying world market risk price and the price of currency risk using an international CAPM with segmentation effects. Second, we study the time varying integration with Markov Switching Model....

A key relationship in international economics is that between trade flows and exchange rates. This paper examines the empirical evidence of S-curve relationship between U.S. trade balance and terms of trade both at the aggregated and disaggregated level from 1989Q1 to 2010Q4. I find evidence of...

Utilizing a panel data set for 13 developed economies, this paper examines the volatility of capital flows following the liberalization of financial markets. The paper focuses on the response of foreign direct investment, portfolio flows, and other debt flows to both financial liberalization and...

We show that Marshall-Lerner condition holds for Brazilian trade balance, and discard a J-curve in the short run. We present these results using impulse-response functions in a variety of (linear and nonlinear) models, including Markov-switching, vector error-correction models.

Using daily data from the Czech Republic in 1/1/1998-31/12/2002, we find that foreign exchange intervention activity is determined by the degree of exchange rate misalignment and lagged intervention. Additionally, inflation targeting regime is a binding constraint of intervention activity.