A small open economy model emphasizing the endogenous interestrate arbitrage was employed to examine whether arbitrage activities would dampen or augment exchange rate volatility against random disturbances. Based on numerical simulation, increased risk aversion of arbitragers was observed to...

Contrast to the BEER, PEER and FEER approaches, this paper develops a two-country model of monopolistic competition to re-examine whether the Chinese Renminbi is undervalued and to what extent it is undervalued. A testable equation that governs the equilibrium exchange rate of Renminbi is...

This paper examines the relationship between exchange rate pass-through and exchange rate volatility. Numerical simulation suggests that increased degree of pass-through may be stabilizing or destabilizing the exchange rate, mainly depending on the source of random disturbances. The result is...

This research re-examines the desirability of central bank interventions in foreign exchange to reduce spot exchange rate volatility. A small open-economy macroeconomic model is developed to incorporate both macroeconomic fundamentals and micro-structural features of foreign exchange markets....

This study surveys U.S. manufacturing intra-industry trade with 12 countries along the Asian Pacific Rim during the period 1990-2003. While the U.S. total trade with China grew by 802% surpassing the rest of APR countries, we see a negative growth of 1.64% in manufacturing intra-industry trade....

Ever since the early 1980s, major industrial countries have been suffering from severe multi-lateral trade imbalances, accompanied by tremendously volatile exchange rates. This paper examines the relationship between trade balance and exchange rate volatility. A stochastic macroeconomic model...