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on International Finance |
| By: | Philipp Maier; Brian DePratto |
| Abstract: | The authors examine the impact of the recent run-up in energy and non-energy commodity prices on the Canadian dollar. Using the Bank of Canada's exchange rate equation, they find that the differences between the actual value of the Canadian exchange rate and the simulated values observed in 2007 are not historically large. Still, given that there is some evidence that the sensitivity of the standard exchange rate equation to changes in energy and non-energy commodities may have changed over time, the authors explore different ways of modelling the impact of energy and non-energy commodity prices. Their results indicate that specifications that explicitly consider the importance of energy and non-energy commodities in Canada's export or production basket may yield more stable coefficient estimates, particularly over recent periods. Future research should investigate the robustness of these findings, particularly if, at some point, price increases for energy and non-energy commodities were to moderate. |
| Keywords: | Exchange rates |
| JEL: | F31 |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:bca:bocadp:08-15&r=ifn |
| By: | Hooy, Chee-Wooi; Chan, Tze-Haw |
| Abstract: | Over the last decade, China and Malaysia have committed to export-led growth policy based on maintenance of their undervalued currencies. Both nations had succumbed to pressure of revaluation to de-peg their currency against the USD, the same day in July 2005. This unique scenario motivated us to examine the dynamic nexus of exchange rate impact on bilateral export and import flows between China and Malaysia. Our analysis contributed in using high frequency monthly data for the recent period from January 1990 to January 2008, based on the Autoregressive Distributed Lag (ARDL) bound testing procedure and generalised impulse response analysis. Our empirical findings reveal that the Marshall-Lerner condition holds that real depreciation accelerates trade expansion in the long run but only the short run import demands adhere to the potential J-curve pattern. Domestic and foreign incomes are significant and correctly signed, suggesting that the China-Malaysia exports and imports are determined by demand side effects. In brief, the study supports for the complementary role of China instead of conflicting (competing) features in the China-Malaysia bilateral trading |
| Keywords: | Exchange rates; Trade; J-curve; Marshall-Lerner Condition; ARDL Bounds test |
| JEL: | F10 F41 C01 |
| Date: | 2008–08–31 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:10916&r=ifn |
| By: | Michael Dotsey; Margarida Duarte |
| Abstract: | Empirical evidence suggests that movements in international relative prices are large and persistent. Nontraded goods, both in the form of final consumption goods and as an input into the production of final tradable goods, are an important aspect driving international relative price movements. In this paper we show that nontraded goods play an important role in the context of an otherwise standard open-economy macromodel. Our quantitative study with nontraded goods generates implications along several dimensions that are more closely in line with the data relative to the model that abstracts from nontraded goods. In addition, contrary to a large literature, standard alternative assumptions about the currency in which firms price their goods are virtually inconsequential for the properties of aggregate variables in our model, other than the terms of trade. |
| Keywords: | exchange rates; nontraded goods; distribution services; incomplete asset markets. |
| JEL: | F3 F41 |
| Date: | 2008–10–01 |
| URL: | http://d.repec.org/n?u=RePEc:tor:tecipa:tecipa-338&r=ifn |
| By: | Timothy J. Kehoe; Kim J. Ruhl |
| Abstract: | A sudden stop of capital flows into a developing country tends to be followed by a rapid switch from trade deficits to surpluses, a depreciation of the real exchange rate, and decreases in output and total factor productivity. Substantial reallocation takes place from the nontraded sector to the traded sector. We construct a multisector growth model, calibrate it to the Mexican economy, and use it to analyze Mexico's 1994-95 crisis. When subjected to a sudden stop, the model accounts for the trade balance reversal and the real exchange rate depreciation, but it cannot account for the decreases in GDP and TFP. Extending the model to include labor frictions and variable capital utilization, we still find that it cannot quantitatively account for the dynamics of output and productivity without losing the ability to account for the movements of other variables. |
| JEL: | E13 F34 F41 |
| Date: | 2008–10 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:14395&r=ifn |
| By: | Yilmaz Akyuz (Third World Network) |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:tek:wpaper:2008/15&r=ifn |