The aim of this paper is to examine, using a four-country stock-flow consistent model, how global imbalances may persist or be resolved when a country such as China adopts an exchange rate regime relative to an anchor basket of currencies. We show that when China pegs its currency to a currency...

Global capital flows into emerging markets, including those in Asia, continue to be volatile. These capital flows generate both benefits and costs. The latter are associated with episodes of currency and banking crises like the 1997 Asian financial crisis and the 2008 global financial and...

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...

In this paper, I examine the effects of advanced economies' conventional monetary policy on gross foreign direct and portfolio investment inflows to emerging economies. I use structural vector autoregressions to analyse and compare the response of each inflow category to world interest rate and...

We analyse the effectiveness of exchange rate interventions for a panel of 18 emerging market economies during the period 2003-11. Using an error-correction model approach, we find that on average intervention is effective in moving the real exchange rate in the desired direction, controlling...

This paper tests the traditional monetary model of exchange rates for a sample of industrialized and emerging market economies by making use of panel techniques that allow for a high degree of heterogeneity across countries. The results demonstrated partial support for the monetary model for...

There is rarely another field in economics where the prevailing theoretical models have been contradicted so strongly by empirical evidence as exchange rate economics. This study therefore attempts to investigate exchange rate dynamics in an exploratory way. It is first demonstrated that the...

Factor analysis performed on a panel of 23 nominal exchange rates from January 1999 to December 2010 yields three common factors. This paper identifies the euro/dollar, Swiss-franc/dollar and yen/dollar exchange rates as empirical counterparts to these common factors. These empirical factors...

In this paper we study the determinants of gross capital flows, project the size of China's international investment positions in 2020 and analyse the implications for the renminbi real exchange rates. We assume in this exercise that the renminbi will have largely achieved capital account...

Reverse shooting of the exchange rate has been put forward in this paper by scrutinizing the adjustment and evolution of the exchange rate towards its new long-run equilibrium level following a change in money supply. Joint and sequential effects of covered interest rate parity and the sticky...