The exchange rate volatility has witnessed a secular decline after the Bretton Woods collapse. We explore the conjecture that this phenomenon is associated with a generalized decrease in the quest for risk exchange hedging among investors. We find indeed that the negative association between...

The model and related empirical examination in this paper explain why previous studies document both positive and negative correlations between exchange rate volatility and observed levels of foreign direct investment. Using a simple model of cross-border mergers and acquisitions, it argues that...

This paper evaluates the impact of international reserves, terms of trade shocks and capital flows on the real exchange rate (REER). We observe that international reserves cushions the impact of TOT shocks on the REER, and that this effect is important for developing but not for industrial...

Using the "trilemma indexes" developed by Aizenman et al. (2010) that measure the extent of achievement in each of the three policy goals in the trilemma - monetary independence, exchange rate stability, and financial openness - we examine how policy configurations affect macroeconomic...

Understanding the determinants of capital inflows is essential to designing an effective policy framework to manage volatile capital flows and their disruptive potential. This paper aims to identify factors that explain the size and volatility of various types of capital flows to developing Asia...

This paper considers the nature and the distribution of trade and FDI effects of a potential enlargement of the European Monetary Union (EMU) to the 10 countries that obtained EU membership in 2004. One-way and two-way error component gravity models are estimated using a data set of unbalanced...

Meese and Rogoff (1983) and subsequent studies find that economic fundamentals are apparently not able to explain exchange rate movements, but we argue that this so-called "Exchange Rate Disconnect Puzzle" arose because researchers such as Meese and Rogoff (1983) did not use the right...

Similar to Chile in the 1990s, Slovenia has introduced an unremunerated reserve requirement (URR) on financial credits in 1995. We find that the URR has not been effective in reducing overall inflows of foreign capital. Hence, the gain in monetary autonomy has been limited. While the overall...

The paper aims to assess what influences volatility of capital flows to emerging countries and whether or not there is a spillover or contagion effect in the volatility. The empirical results suggest strong and significant contagion effects from global and regional volatilities on the volatility...

We examine whether there is a relationship between foreign equity trading and average total volatility, measured as the value-weighted average of stock-return variances in the Istanbul Stock Exchange. We employ foreign equity purchase and sale data to track changes in foreign equity trading,...