In this paper, we empirically investigate whether multilateral adjustment to large U.S. external imbalances can help explain movements in the bilateral exchange rates of three commodity currencies---the Australian, Canadian and New Zealand (ACNZ) dollars. To examine the relationship between...

In a recent paper, Gruber (Gruber, J.W., 2004, A Present Value Test of Habits and the Current Account, Journal of Monetary Economics 51, 1495-1507) claims that habit formation in consumption plays an important role in current account fluctuations in selected developed countries, extending the...

In an influential paper, Engel and West (2005) claim that the near random-walk behavior of nominal exchange rates is an equilibrium outcome of a variant of present-value models when economic fundamentals follow exogenous first-order integrated processes and the discount factor approaches one....