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on International Finance |
| By: | Francis Cripps (Alphametrics Co., Ltd); Alex Izurieta and Terry McKinley (Cambridge Endowment for Research in Finance,University of Cambridge); Terry McKinley (International Poverty Centre) |
| Keywords: | Poverty, Exchange Rate |
| Date: | 2007–06 |
| URL: | http://d.repec.org/n?u=RePEc:ipc:opager:0038&r=ifn |
| By: | Cotter, John; Dowd, Kevin |
| Abstract: | This paper examines the intra-day seasonality of transacted limit and market orders in the DEM/USD foreign exchange market. Empirical analysis of completed transactions data based on the Dealing 2000-2 electronic inter-dealer broking system indicates significant evidence of intraday seasonality in returns and return volatilities under usual market conditions. Moreover, analysis of realised tail outcomes supports seasonality for extraordinary market conditions across the trading day. |
| JEL: | G15 G1 |
| Date: | 2007 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:3502&r=ifn |
| By: | Pierpaolo Benigno |
| Abstract: | A dynamic model of consumption and portfolio decisions is analyzed in which agents seek robust choices against some misspecification of the model probability distribution. This near-rational environment can at the same time explain an imperfect international portfolio diversification and break the link between cross-country consumption correlation and real exchange rate as it is usually implied by standard preference specifications. Portfolio decisions imply moment restrictions on asset prices that are useful to extract information on the degree of near-rationality present in the data. |
| JEL: | F41 G11 G15 |
| Date: | 2007–06 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:13173&r=ifn |
| By: | San Sau Fung; Marc Klau; Guonan Ma; Robert N. McCauley |
| Abstract: | Discussion of exchange rate policy in Asia would benefit from appropriate measures of exchange rates on a multilateral basis. The purpose of this paper is to refine the construction of the effective exchange rates (EERs) for Asian economies, to make allowances for the role of Hong Kong SAR as an entrepôt and to reflect the fast-growing intra-regional trade. For the scenarios under consideration, it turns out that adjusting for re-export trade through Hong Kong SAR is generally more important in the determination of trade weights than updating the base year. The proposed refinements have important policy implications, particularly in estimating the relative sizes of currency blocs, should the region's exchange rate policies become more oriented to trade baskets than to bilateral dollar rates. |
| Keywords: | effective exchange rates, intra-regional trade |
| JEL: | F10 F31 |
| Date: | 2006–10 |
| URL: | http://d.repec.org/n?u=RePEc:bis:biswps:217&r=ifn |
| By: | Gabriele Galati; Philip D. Wooldridge |
| Abstract: | Well developed financial markets are a necessary condition for a currency to play a role as a reserve currency. The introduction of the euro greatly improved the functioning of euro financial markets. This paper investigates whether euro financial markets have developed sufficiently to facilitate the emergence of the euro as a reserve currency on par with the US dollar. We find that the liquidity and breadth of euro financial markets are fast approaching those of dollar markets, and as a result the euro is eroding some of the advantages that have historically supported the pre-eminence of the US dollar as a reserve currency. This strengthens the incentive for monetary authorities to reconsider the currency composition of their reserves. Nevertheless, the introduction of the euro has not yet resulted in a significant change in the currency composition of official reserve holdings. The US dollar has maintained its place as the dominant reserve currency, supported perhaps by the edge that dollar financial markets still have over euro markets in terms of size, credit quality and liquidity, as well as inertia in the use of international currencies. |
| Keywords: | international currency, foreign exchange reserves, currency composition, dollar, euro, financial markets |
| JEL: | E58 F30 F31 G11 G15 |
| Date: | 2006–10 |
| URL: | http://d.repec.org/n?u=RePEc:bis:biswps:218&r=ifn |
| By: | Jeevan K Khundrakpam |
| Abstract: | This paper examines the behaviour of exchange rate pass-through to domestic prices in India during the post-economic reforms initiated since the major devaluation of July 1991. It observes that there is no clear-cut evidence of a fall in exchange rate pass-through to domestic prices. Further, there is asymmetry in pass-through between appreciation and depreciation, and between sizes of the exchange rate change. Based on the empirical evidence provided in the literature, the paper conjectures that reductions in import tariffs, the removal of trade restrictions, the increased import penetration ratio and openness of the economy and the change in the composition of imports following the economic liberalisation could have transitorily negated the impact of lower inflation on pass-through. Part of the non-decline in long-run pass-through is due to a rise in inflation persistence. This could follow from the dismantling of price controls in an environment of periodic spurts in inflation around a non-declining inflationary trend, combined with a rise in the government deficit, which has a nexus with inflation in India. |
| Keywords: | pass-through, prices, exchange rate |
| JEL: | E31 E52 F41 |
| Date: | 2007–02 |
| URL: | http://d.repec.org/n?u=RePEc:bis:biswps:225&r=ifn |