Economic agents undertake actions to protect themselves from sort-run impact of foreign exchange rate fluctuations: Nominal goods prices are set in consumer' currencies and firms hedge foreign exchange risk. A model is presented here which shows that these features of the economy can lead to...

We investigate the behavior of long-run U.S./U.K. real exchange rate from 1885 to 1995.

Recent tests using long data series find evidence in favor of long-run PPP (by rejecting either the null hypothesis of unit roots in real exchange rates and relative prices.)

We find evidence that the law of one price (LOOP) holds more nearly for country pairs that are within geographic regions that for country pairs that are not.

If oil exporters stabilize the purchasing power of their export revenues in terms of imports, exchange rate developments (and particularly, developments in the US dollar/euro exchange rate) may contain information about oil price changes. This hypothesis depends on three conditions: (a) OPEC has...

The early twentieth century role of U.S. “money doctors” in establishing Latin American exchange rate regimes and monetary institutions is relatively well known. For example, the work of Edwin Kemmerer in the Andes has been extensively documented. Not so well-known is the work of Latin...

The general view of the media, bankers, business and politicians, not noticeably contradicted by academics, is that one of the main functions, or the main function, of the central bank is to analyse the progress of the economy, and then to steer it with skilful judgement towards health and...

This paper examines the mutually reinforcing interactions between exchange rate dynamics and technical trading strategies. I first show that technical trading systems have been quite profitable during the floating rate period. This profitability stems from the successful exploitation of...

Market analysts and central banks often use the implied volatility of FX options as an indicator of expected exchange rate uncertainty. The aim of our study is to investigate the limits of this statistic. We present some key factors that may deviate the value of implied volatility from the...