We apply Purchasing Power Parity (PPP) theory to the analysis of long- run equilibrium in the foreign exchange market. We study the case of Portugal vis-à-vis Germany and Spain, and the case of Spain vis-à-vis Germany, in the period 1960-1990. The empirical analysis was based on unit-root...

This study aims to analyse the Portuguese economic policy of disinflation through a nominal stabilization policy of the Portuguese escudo. We study the pegging of the Portuguese escudo (PTE) to the Deutsch mark (DM) knowing the reputation of the Bundesbank for its anti- inflationary record and...

We study the impact of Japanese foreign exchange intervention on the volatility of the yen/dollar exchange rate since the early 1990s based on a GARCH framework. Using daily intervention data provided by the Japanese Ministry of Finance, we show that the success of interventions varies over...

This paper investigates the asymmetric and persistent adjustment of the European real exchange rates using the framework of nonlinear cointegration. We explain the episodes of slow mean- reversion dynamics over the period from 1979 to 1999. A test of unit root against STAR cointegration is...

A crucial question centering many recent debates in the international macroeconomics is under which currency the price is sticky. This paper provides a microfoundation to study the firm¡¦s choice of price setting currency in the sticky price model. I first prove that the risk preference is a...

Using nonlinear unit root tests developed by Kapetanios et al. (2003), we find strong evidence that the Consumer Price Index (CPI) and Wholesale Price Index (WPI) based Malaysian Ringgit – U.S. Dollar (MYR/USD) real exchange rates are nonlinear stationary, implying that MYR/USD nominal...

Using nonlinear unit root tests developed by Kapetanios et al. (2003), we find strong evidence that the Consumer Price Index (CPI) and Wholesale Price Index (WPI) based Malaysian Ringgit – U.S. Dollar (MYR/USD) real exchange rates are nonlinear stationary, implying that MYR/USD nominal...

The equilibrium exchange rate is a closely scrutinized variable in international finance and monetary economics. A model to estimate an equilibrium exchange rate is proposed in this paper. It consists of several building blocks: a state-space structure, uncovered interest parity and the...

It has been twenty years since Frankel (1979) offered the classic empirical support for the Dornbusch (1976) overshooting model against the simple monetary approach model, and almost that long since Driskill and Sheffrin (1981) uncovered some important inconsistencies between Frankel’s...

The purpose of this paper is to put the future of the US dollar into a logical framework which comprises the global development mechanism. Two models of growth collide: the US «locomotive», based on the international use of the dollar, and which requires exogenous pushes coming permanently...