This paper empirically evaluates the predictive performance of the International Monetary Fund's (IMF) exchange rate assessments with respect to future exchange rate movements. The assessments of real trade-weighted exchange rates were conducted from 2006 to 2011, and were based on three...

The recent past has seen an increased interest in piecewise linear real exchange rate models. By invoking Heckscher's (1916) 'commodity points' it has been argued that a threshold autoregressive (TAR) model should be used to study movements in the real exchange rate. This paper examines the...

In assessing Alexander Swoboda's great influence on economics, two themes stand out: the determinants of global inflation, particularly in the 1970s, and the choice of an exchange rate regime consistent with domestic monetary and fiscal policies. Although seemingly narrowly focused on China, our...

If floating exchange rates stabilize shocks rather than create shocks, a country that joins a monetary union or fixes its exchange rate looses a stabilizing mechanism. We use a first difference structural VAR on trade weighted macroeconomic data to study the role of floating exchange rates for...

We show that empirical results concerning the behavior of floating exchange rates differ between otherwise identical cointegrated and non-cointegrated VAR models. In particular, virtually all ten-year movements in nominal exchange rates are due to fundamental supply and demand shocks when long...

This paper analyzes the stabilizing properties of alternative monetary policy regimes. In practice there is a choice between two broad types of monetary policy regimes: a fixed exchange rate regime or a floating exchange rate regime. In this paper I compare exchange rate targeting with different...

Tentative evidence suggests that the empiricalfailure of uncovered interest parity (UIP) is confined to short-term interest rates. Tests of UIP for long-term interest rates are however hampered by various data problems. By focusing on short investments in long-term bonds, these data problems can...

This paper analyses one of the main pillars of Brazil.s newly found economic resilience: a maturing FX market providing support to its managed .oating exchange rate regime. I develop a microstrucure model suitable to describe the Brazilian FX market, an emerging economy frequently subjected to...

In the last decades, many developing countries abandoned their existing policy regimes and adopted inflation targeting (IT) by which they aimed to control inflation through the use of policy interest rates. During the period before the crisis, most of these countries experienced large...

We build a two-country model with imperfect financial intermediation. Banks face limits to arbitrage which lead to positive excess returns in the investment markets and a risk premium in the international credit market. Gross capital flows affect the exchange rate since banks are balance sheet...