Changes in foreign asset holdings are one channel through which agents adjust to macroeconomic shocks. In this paper, we test whether foreign bank assets change as a result of domestic and foreign macroeconomic shocks. We frame our empirical analysis in a standard new open economy macro model in...

The main goal of this paper is to tackle the empirical issues of the real exchange rate literature by applying recently developed panel cointegration techniques to a structural long-run real exchange rate equation. Using annual data for 67 countries over 1966-97, we find evidence of...

Changes in foreign asset holdings are one channel through which agents adjust to macroeconomic shocks. In this paper, we test whether foreign bank assets change as a result of domestic and foreign macroeconomic shocks. We frame our empirical analysis in a standard new open economy macro model in...

We study how real exchange rate dynamics are affected by monetary policy in dynamic, stochastic, general equilibrium, sticky-price models. Our analytical and quantitative results show that the source of interest rate persistence - policy inertia or persistent policy shocks - is key. When the...

In this paper we investigate how income growth rates in one country are affected by growth rates in partner countries, testing for the importance of pairwise country links as well as characteristics of the receiving country (trade and financial open- ness, exchange rate regime, fiscal...

We study how real exchange rate dynamics are affected by monetary policy in dynamic, stochastic, general equilibrium, sticky-price models. Our analytical and quantitative results show that the source of interest rate persistence - policy inertia or persistent policy shocks - is key. In the...

In popular studies, the theory of purchasing power parity (PPP) is tested for the real exchange rate (RER) that is constructed by price indexes and all variables are logarithmic. In this paper, we test the absolute PPP theory for the RER that is constructed by general price levels and is in its...

We compare business cycle fluctuations in Sub-Saharan African (SSA) countries vis-à-vis the rest of the world. Our main results are as follows: (i) African economies stand out by their macroeconomic volatility, which is is reflected in the volatility of output and other macro variables; (ii)...

Egypt, Morocco and Tunisia face challenges competing on the global markets, as shown by their relatively low and stagnant export shares. The limited export competitiveness has hampered external demand, growth and employment. Applying, for the first time to North Africa, the stock-flow approach...