Nominal exchange rates strongly co-move. However, little is known about the economic source of common variation. This paper examines how international trade links nominal exchange rates. First, I document that two countries that trade more intensively with each other have more correlated...

This paper examines the relation between exchange rates and prices in India over three periods, 1975-1986, 1992-1998 and 1999-2010. These periods which are marked with changing trading and monetary policy regimes provide an interesting case study to analyze the importance of openness and...

Equilibrium exchange rate theories make the assumption that the Real Equilibrium Exchange Rate (RER) is independent from internal equilibrium and economic policies. We develop a model in which economic policies depend on the minimisation of an intertemporal loss function, and we show that in a...

Understanding and predicting the evolution of exports after a change in the nominal exchange rate is of central importance in international economics. Most of the literature focuses on estimating this relationship by reduced form, with the aim of uncovering a single structural parameter, but...

Using a novel dataset on changes in capital controls and currency-based prudential measures in 17 major emerging market economies (EMEs) over the period 2001-2011, this paper provides new evidence on domestic and multilateral (or spillover) effects of capital controls before and after the global...

This paper draws a causal link between the rise of global value chain participation and the decline of exchange rate pass-through to import prices over the last decades. We first present a structural two-country model in order to illustrate how participation in global value chains can impact...

Botswana's successive currency devaluations and recent move from a fixed to a crawling peg exchange rate regime raise the question of whether the exchange rate might be misaligned with economic fundamentals. This paper, applying the behavioral equilibrium exchange rate (BEER) approach, analyzes...

This paper compares two approaches for examining the extent to which a country`s actual real effective exchange rate is consistent with economic fundamentals: the FEER approach, which involves calculating the real exchange rate that equates the current account at full employment with sustainable...