|
on Open Economy Macroeconomics |
| By: | White, William R. (OECD) |
| Abstract: | The current belief system that says “all will be well” if domestic price stability can be maintained is fundamentally flawed. If this can be achieved only through monetary, credit and debt expansion, the end result will be an increased risk of systemic crisis. Moreover, false beliefs about how exchange rate systems function, at both the global level and within the Eurozone, imply international “spillover” effects that increase both the likelihood and the seriousness of such crises. Gross international capital flows pose as many (perhaps more) dangers than do net flows (ie current account imbalances). And false beliefs about exchange rate regimes not only compromise crisis prevention, but they also hinder crisis management and resolution. At the global level, we still lack the instruments to do either effectively should current problems worsen. In the Eurozone, the crisis which began in 2010 has not been well managed and remains fundamentally unresolved. |
| JEL: | B52 E5 F42 |
| Date: | 2015–09–01 |
| URL: | http://d.repec.org/n?u=RePEc:fip:feddgw:250&r=opm |
| By: | Glick, Reuven (Federal Reserve Bank of San Francisco); Leduc, Sylvain (Federal Reserve Bank of San Francisco) |
| Abstract: | We examine the effects of unconventional monetary policy surprises on the value of the dollar using high-frequency intraday data and contrast them with the effects of conventional policy tools. Identifying monetary policy surprises from changes in interest rate future prices in narrow windows around policy announcements, we find that monetary policy surprises since the Federal Reserve lowered its policy rate to the effective lower bound have had larger effects on the value of the dollar. In particular, we document that the impact on the dollar has been roughly three times that following conventional policy changes prior to the 2007-08 financial crisis. |
| JEL: | E43 E5 F31 |
| Date: | 2015–11–29 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedfwp:2015-18&r=opm |
| By: | Saroj Bhattarai; Arpita Chatterjee; Woong Yong Park |
| Abstract: | We estimate international spillover effects of US Quantitative Easing (QE) on emerging market economies. Using a Bayesian VAR on monthly US macroeconomic and financial data, we first identify the US QE shock with non-recursive identifying restrictions. We estimate strong and robust macroeconomic and financial impacts of the US QE shock on US output, consumer prices, long-term yields, and asset prices. The identified US QE shock is then used in a monthly Bayesian panel VAR for emerging market economies to infer the spillover effects on these countries. We find that an expansionary US QE shock has significant effects on financial variables in emerging market economies. It leads to an exchange rate appreciation, a reduction in long-term bond yields, a stock market boom, and an increase in capital inflows to these countries. These effects on financial variables are stronger for the “Fragile Five” countries compared to other emerging market economies. We however do not find significant effects of the US QE shock on output and consumer prices of emerging markets. |
| Keywords: | US Quantitative Easing, Spillovers, Emerging Market Economies, Bayesian VAR, Panel VAR, Non-recursive Identification, Fragile Five Countries |
| JEL: | C31 E44 E52 E58 F32 F41 F42 |
| Date: | 2015–12 |
| URL: | http://d.repec.org/n?u=RePEc:een:camaaa:2015-47&r=opm |
| By: | Syed Abul, Basher; Alfred A, Haug; Perry, Sadorsky |
| Abstract: | This paper uses Markov-switching models to investigate the impact of oil shocks on real exchange rates for a sample of oil exporting and oil importing countries. This is an important topic to study because an oil shock can affect a country’s terms of trade which can affect its competitiveness. We detect significant exchange rate appreciation pressures in oil exporting economies after oil demand shocks. We find limited evidence that oil supply shocks affect exchange rates. Global economic demand shocks affect exchange rates in both oil exporting and importing countries, though there is no systematic pattern of appreciating and depreciating real exchange rates. The results lend support to the presence of regime switching for the effects of oil shocks on real exchange rates. |
| Keywords: | Markov-switching; exchange rates; oil shocks. |
| JEL: | F31 G15 Q43 |
| Date: | 2015–12–06 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:68232&r=opm |
| By: | Jiri Kukacka (Institute of Economic Studies, Faculty of Social Sciences, Charles University in Prague, Smetanovo nabrezi 6, 111 01 Prague 1, Czech Republic; Institute of Information Theory and Automation, Academy of Sciences of the Czech Republic, Pod Vodarenskou Vezi 4, 182 00, Prague, Czech Republic); Filip Stanek (Institute of Economic Studies, Faculty of Social Sciences, Charles University in Prague, Smetanovo nabrezi 6, 111 01 Prague 1, Czech Republic) |
| Abstract: | We explore possible effects of a Tobin tax on exchange rate dynamics in a heterogeneous agent model. To assess the impact of the Tobin tax in this framework, we extend the model of De Grauwe and Grimaldi (2006) by including transaction costs and perform numerical simulations. Motivated by the importance of the market microstructure, we choose to model the market as being cleared by a Walrasian auctioneer. This setting could more closely resemble the two-layered structure of foreign exchanges at daily frequency than a price impact function, which is often adopted in similar studies. We find that the Tobin tax can deliver a moderate reduction of return volatility and kurtosis. In addition, simulations indicate that the Tobin tax reduces the degree of mispricing in the time series, which is primarily achieved by eliminating long-lasting deviations from the fundamental value. |
| Keywords: | Tobin Tax, Foreign Exchange Market, Agent Based Modeling, Walrasian Auctioneer |
| JEL: | C63 D84 F31 G18 |
| Date: | 2015–11 |
| URL: | http://d.repec.org/n?u=RePEc:fau:wpaper:wp2015_26&r=opm |