After identifying shortcomings associated with most previous studies on the relation between the trade balance and the exchange rate, we reexamine the statistical relation between these two variables by employing the cointegration and error-correction modeling techniques. For most countries...

This study examines whether the long-run purchasing power parity (PPP) holds in transition economies (Bulgaria, the Czech Republic, Hungary, Latvia, Lithuania, Poland, Romania and Russia) using monthly data over the 1995 - 2011 period. We apply a recently introduced panel stationary test, which...

This paper focuses on the analysis of the long-run response of the Real Exchange Rate (RER) to political risks and tests whether non-economic variables have an impact on RER in 31 emerging and developing countries. We use annual data from the International Country Risk Guide database over the...

To account for currency substitution, most studies today include exchange rate as a determinant of the demand for money, in addition to income and interest rate. This tradition goes back to Robert Mundell who introduced this notion in 1963. In this paper, we demonstrate that the failure to find...

The 'S-Curve' phenomenon postulates that while cross correlation coefficients between past values of the trade balance and current exchange rate could be negative, the same cross-correlation between future values of the trade balance and current exchange rate could be positive. In this study, we...

Conventional wisdom states that currency depreciation in oil-producing countries are contractionary because demand effects, limited by the prevalence of oil exports priced in dollars, are more than offset by adverse supply effects. Iran, however, has experienced a rapid increase in non-oil...

Excess money supply was one factor among several contributing to the 1997 financial crisis in East Asian countries. The crisis resulted in abnormal currency depreciation. Using monthly data over the period 1987-2000 and error correction modeling techniques, we pay tribute to Rudiger Dornbusch by...