The paper finds significant deviations between short-term emerging market real interest rates and world real interest rates primarily due to the inflationary expectations of the local investor base. We test for long-run real interest convergence in emerging markets using a time varying panel...

Ex-post deviations from uncovered interest parity (UIP) – realized differences between dollar returns on identical assets of different currencies – equal the real interest differential plus real exchange rate growth. Among industrialized countries, UIP deviations are largely explained by...

This paper studies large reductions in current account deficits and exchange rate depreciations in low- and middle-income countries. It examines which factors help predict the occurrence of a reversal or a currency crisis, and how these events affect macroeconomic performance. Both domestic...

This paper investigates the extent to which financial markets in the Pacific Basin Region have become more integrated, by analyzing the comovements of real interest rates. The paper uses cointegration and error correction models and draws inferences on the degree of capital market integration by...

The medium-term predictability of exchange rate movements is examined using three models of fundamentals: purchasing power parity, the monetary model, and uncovered interest parity. While the first two approaches yield favorable in-sample results, these largely reflect finite-sample estimation...

This paper empirically examines the long-run relationship between real exchange rates and real interest rate differentials over the recent floating exchange rate period, using a panel cointegration method, with data for a set of industrialized countries. The paper finds evidence of statistically...

The effects of government expenditures on interest rates, terms of trade, and real exchange rates are examined in a three-good (importables, exportables, nontradables), two-country, intertemporal, optimizing model. Temporary spending increases (on tradable or nontradable goods) may raise or...

This paper analyzes the recent behavior of real exchange rates, the trade balance and the net foreign asset position of the United States in an intertemporal optimizing model of the world economy that incorporates heterogeneity across countries and imperfect international capital and good...

Based on China''s experience between 1980 and 2002, a cointegrated vector autoregression model was established to explore the relationships among real interest rates, real exchange rates and balance of payments in China. Taking into account institutional changes, the empirical study shows that...

This paper empirically analyzes Japanese long-run exchange rates from several perspectives. Several exchange rate models are considered, including the purchasing power parity, the real interest differential model, and the hybrid models à la Hooper and Morton (1982). A notable feature of the...