This paper assesses the impact of economic policy uncertainty to UK monetary policy stance and exchange rate movements in light of the UK's decision to leave the European Union. Our results show that the economic significance of exchange rate movements heightens during the Referendum period. We...

Dick Sabot, an active member of CGD's founding Board of Directors, was finishing this paper when he died suddenly on July 6 of 2005. The paper highlights the risks to developing countries posed by the growing U.S. external deficit and describes three possible scenarios. In the first, the US...

This paper analyzes the causes of the massive peso devaluation of December 1994 and the ensuing economic crisis in Mexico. The paper argues that, while earlier devaluation might have been helpful, Mexico?s economic growth strategy in the early 1990s was fraught with internal inconsistencies that...

This paper aims to estimate the equilibrium real exchange rate for the Brazilian economy. The equilibrium exchange rate is defined as the level of exchange that guarantees that the net foreign asset position is stable over time. An econometric model is estimated using cointegration techniques....

The paper analyses the heterogeneity in the link between macroeconomic fundamentals and exchange rates. For a set of important US-specific economic shocks, it shows that such shocks have exerted a remarkably heterogeneous effect on global exchange rate configurations over the past 25 years....

This paper analyzes the relation between exchange rate volatility and several macroeconomic variables, namely real per capita output growth, the credit cycle, the stock of inward foreign direct investment (FDI) and the current account balance, in the Central and Eastern European EU Member...

A striking and unexpected feature of the financial crisis has been the sharp appreciation of the US dollar against virtually all currencies globally. The paper finds that negative US-specific macroeconomic shocks during the crisis have triggered a significant strengthening of the US dollar,...

We examine whether the Chinese exchange rate is misaligned and how Chinese trade flows respond to the exchange rate and to economic activity. We find, first, that the Chinese currency, the renminbi (RMB), is substantially below the value predicted by estimates based upon a cross-country sample,...

This paper develops a multi-sector New Keynesian model of a small open economy that includes commodity, manufacturing, non-tradable, and import sectors. Price and wage rigidities are sector specific, modelled à la Calvo-Yun style contracts. Labour and capital are imperfectly mobile across...

This paper investigates the impact of exchange rate movements on the conduct of monetary policy in Australia, Canada, New Zealand and the United Kingdom. We develop and estimate a structural general equilibrium two-sector model with sticky prices and wages and limited exchange rate pass-through....