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The valuation channel of external adjustment

Ghironi, Fabio; Lee, Jaewoo; Rebucci, Alessandro - 2009

position through the valuation channel of external adjustment, namely capital gains and losses on the country's external assets … and liabilities. We examine this valuation channel theoretically in a dynamic equilibrium portfolio model with … quantities in the definition of net foreign assets, we can characterize the first-order dynamics of both valuation effects and …

Persistent link: https://www.econbiz.de/10010280890

Currency Undervaluation and Sovereign Wealth Funds: A New Role for the World Trade Organization

Subramanian, Arvind; Mattoo, Aaditya - 2008

Two aspects of global imbalances—undervalued exchange rates and sovereign wealth funds (SWFs)—require a multilateral response. For reasons of inadequate leverage and eroding legitimacy, the International Monetary Fund (IMF) has not been effective in dealing with undervalued exchange rates....

Persistent link: https://www.econbiz.de/10005012841

How to reduce Germany's current account surplus?

Behringer, Jan; van Treeck, Till; Truger, Achim - 2020

Germany has had a large and persistent current account surplus for the past almost two decades. We review different theoretical explanations of this phenomenon and conclude from the empirical litera-ture that Germany's external surplus reflects an imbalance that is a threat to macroeconomic...

Persistent link: https://www.econbiz.de/10014459468

Covered interest parity: A stochastic volatility approach to estimate the neutral band

Hernández, Juan Ramón - 2020

The neutral band is the interval where deviations from Covered Interest Parity (CIP) are not considered meaningful arbitrage opportunities. The band is determined by transaction costs and risk associated to arbitrage. Seemingly large deviations from CIP in the foreign exchange markets for the US...

Persistent link: https://www.econbiz.de/10012616395

The valuation effects of trade

Barbiero, Omar - 2021

in explaining cash flows of trading firms. Large firms absorb valuation shocks in their balance sheet, and small …

Persistent link: https://www.econbiz.de/10012882643

Designing Policies in the Presence of Hawala Markets.

Rao, R. Kavita; Tandon, Suranjali - 2015

To deal with rising current account deficits, the government often uses instruments such as increase in customs tariffs. These are expected to induce an appreciation in the currency. In the presence of hawala markets which constitute an alternative payment mechanism, the control exerted by the...

Persistent link: https://www.econbiz.de/10011122407

Exchange rate market expectations and Central Bank policy: The case of the Mexican peso-US dollar from 2005-2009

Abarca, Gustavo; Benavides, Guillermo; Rangel, José Gonzalo - 2010

We examine two approaches characterized by different tail features to extract market expectations on the Mexican peso-US dollar exchange rate. Expectations are gauged by risk-neutral densities. The methods used to estimate these densities are the Volatility Function Technique (VFT) and the...

Persistent link: https://www.econbiz.de/10010322542

The dollar during the Global Recession: US monetary policy and the exorbitant duty

Stavrakeva, Vania; Tang, Jenny - 2018

We document that during the Global Recession, US monetary policy easings triggered the "exorbitant duty" of the United States, the issuer of the world's dominant currency, by causing a dollar appreciation and a transfer of wealth from the United States to the rest of the world. This dollar...

Persistent link: https://www.econbiz.de/10012059601

A fundamental connection: Exchange rates and macroeconomic expectations

Stavrakeva, Vania; Tang, Jenny - 2020

This paper presents new stylized facts about exchange rates and their relationship with macroeconomic fundamentals. We show that macroeconomic surprises explain a large majority of the variation in nominal exchange rate changes at a quarterly frequency. Using a novel present value decomposition...

Persistent link: https://www.econbiz.de/10012606359

Got milk? The effect of export price shocks on exchange rates

Stein, Hillary - 2023

I examine the effect of exogenous terms of trade shocks on an exchange rate by turning to New Zealand's dairy auctions. Dairy is New Zealand's largest export category, making up almost 20 percent of exports. Specifically, whole milk powder accounts for 6 to 11 percent of total exports, and its...

Persistent link: https://www.econbiz.de/10014442959