We examine the relative predictive power of the sticky price monetary model, uncovered interest parity, and a transformation of the net exports variable. In addition to bringing a new approach (utilizing our measure of external imbalance suggested by Gourinchas and Rey) and data spanning a more...

The adoption of quantitative easing (QE) policy by the United States (US) Federal Reserve Bank since early 2009 has aroused widespread concerns in Asia and elsewhere regarding its possible impact in terms of the weakening of the US dollar and stimulating capital outflows to emerging economies...

This paper describes the relationship between central bank interest rates and exchange rates under a capital control regime. Higher interest rates may strengthen the currency by inducing owners of local currency assets not to sell local currency off shore. There is also an effect that goes in...