In this paper, we study the trilemma configuration of the Turkish economy. The paper starts by empirically testing the Mundell-Fleming theoretical concept of an “impossible trinity” (trilemma) for Turkey, following the Aizenman, Chinn and Ito (ACI) approach. This includes calculating the...

This paper studies the long-run welfare effect of the extra volatility of country spread due to the possibility of sudden stops. Both analytical and numerical results show that sudden stops have weaker output impact when the small open economy is more open to trade. However, welfare consequences...

This study investigates the impact of trade openness on Malaysian exchange rate. The findings show that most of the variables are statistically significant and carried the expected signs. As predicted by the theory, the rise of the income level and stock market index in Malaysia will lead to the...

This study examines both short-run and long-run causal relationship between stock market capitalization, trade openness and economic growth in Thailand. Quarterly data over the period from the first quarter of 1993 to the fourth quarter of 2013 are used in the analysis. The results from this...

This study examines both short-run and long-run causal relationship between stock market capitalization, trade openness and economic growth in Thailand. Quarterly data over the period from the first quarter of 1993 to the fourth quarter of 2013 are used in the analysis. The results from this...

This paper tries to explain empirical causation between the exports and the real exchange rate. The paper develops a simple model, the model is based on the relationship of exports to: real interest rates differential, foreign demand for domestic goods and real exchange rate. The paper then...

The massive stocks of foreign exchange reserves, mostly held in the form of U.S. T-Bonds by emerging economies, are still an important puzzle. Why do emerging economies continue to willingly loan to the United States despite the low rates of return? We propose that a dynamic general equilibrium...

Recent empirical studies have highlighted that valuation effects associated with fluctuations of nominal exchange rates are one of the key components that drive the behaviour of the net foreign assets position of a country. In this paper, we propose a two-country overlapping-generations model of...

In the current paper, a new and simple currency valuation model called the ratio model is proposed based on the Penn effect (a systematic deviation of the purchasing power parity (PPP)). The ratio model, which reduces the uncertainty of the econometric specification that many other valuation...

We propose an alternative model and method to reconcile the puzzling feature in the relationship between the real exchange rate and real interest rate differentials. Our simple two-country model with preset prices, along with firms’ misperception about the future exchange rate, implies that...