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Christian Dreger - One of the best experts on this subject based on the ideXlab platform.
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does the nominal Exchange Rate Regime affect the real interest parity condition
EconStor Open Access Articles, 2010Co-Authors: Christian DregerAbstract:The real interest parity (RIP) condition combines two cornerstones in international finance, uncovered interest parity (UIP) and ex ante purchasing power parity (PPP). The extent of deviation from \{RIP\} is therefore an indicator of the lack of product and financial market integration. This paper investigates whether the nominal Exchange Rate Regime has an impact on RIP. The analysis is based on 15 annual real interest Rates and covers a long time span, 1870–2006. Four subperiods are distinguished and linked to fixed and flexible Exchange Rate Regimes: the Gold Standard, the interwar float, the Bretton Woods system and the current managed float. Panel integration techniques are applied to increase the power of the tests, where cross section correlation is embedded via common factor structures. The results suggest that \{RIP\} holds as a long run condition irrespectively of the nominal Exchange Rate Regime. However, adjustment towards \{RIP\} is affected by both the institutional framework and the historical episode. Half lives of shocks tend to be lower under fixed Exchange Rates and in the first part of the sample. Although barriers to trade and capital controls have been removed, they did not lead to lower half lives during the managed float.
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does the nominal Exchange Rate Regime affect the real interest parity condition
Social Science Research Network, 2008Co-Authors: Christian DregerAbstract:The real interest parity (RIP) condition combines two cornerstones in international finance, uncovered interest parity (UIP) and ex ante purchasing power parity (PPP). The extent of deviation from RIP is therefore an indicator of the lack of product and financial market integration. This paper investigates whether the nominal Exchange Rate Regime has an impact on RIP. The analysis is based on 15 annual real interest Rates and covers a long time span, 1870-2006. Four subperiods are distinguished and linked to fixed and flexible Exchange Rate Regimes: the Gold Standard, the interwar float, the Bretton Woods system and the current managed float. Panel integration techniques are used to increase the power of the tests. Cross section correlation is embedded via common factor structures. The results suggest that RIP holds as a long run condition irrespectively of the Exchange Rate Regimes. Adjustment towards RIP is affected by the institutional framework and the historical episode. Half lives of shocks tend to be lower under fixed Exchange Rates and in the first part of the sample, probably due to higher price flexibility before WWII. Although barriers to foreign trade and capital controls were substantially removed after the collapse of the Bretton Woods system, they did not lead to lower half lives during the managed float.
Reza Siregar - One of the best experts on this subject based on the ideXlab platform.
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choice of Exchange Rate Regime currency board hong kong or monitoring band singapore
Social Science Research Network, 2003Co-Authors: Ramkishen S Rajan, Reza SiregarAbstract:Following the East Asian crisis, a number of observers have advocated that small and open economies in Asia adopt an irrevocably fixed Regime. Such a hard peg, it is argued, signals greater commitment to rule out arbitrary Exchange Rate adjustments as well as the authorities' willingness to subordinate domestic policy objectives such as output and employment growth to the maintenance of the pegged Exchange Rate. But is this a reasonable position to adopt? In order to answer this question, we consider and contrast the experiences of Hong Kong and Singapore. While both of these economies share a number of broad similarities, the former opeRates a US dollar-linked currency board arrangement and the latter maintains an adjustable peg in the form of a monitoring band arrangement with the central parity based on an undisclosed trade-weighted currency basket.
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Choice of Exchange Rate Regime: Currency Board (Hong Kong) or Monitoring Band (Singapore)?
2024Co-Authors: Ramkishen S Rajan, Reza SiregarAbstract:Following the East Asian crisis, a number of observers have advocated that small and open economies in Asia adopt an irrevocably fixed Regime. Such a hard peg, it is argued, signals greater commitment to rule out arbitrary Exchange Rate adjustments as well as the authorities' willingness to subordinate domestic policy objectives such as output and employment growth to the maintenance of the pegged Exchange Rate. But is this a reasonable position to adopt? In order to answer this question, we consider and contrast the experiences of Hong Kong and Singapore. While both of these economies share a number of broad similarities, the former opeRates a US dollar-linked currency board arrangement and the latter maintains an adjustable peg in the form of a monitoring band arrangement with the central parity based on an undisclosed trade-weighted currency basket. Copyright Blackwell Publishers Ltd/University of Adelaide and Flinders University of South Australia 2002.
Peter Tillmann - One of the best experts on this subject based on the ideXlab platform.
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international financial integration and national price levels the role of the Exchange Rate Regime
Journal of International Money and Finance, 2012Co-Authors: Mathias Hoffmann, Peter TillmannAbstract:This paper proposes a new perspective on systematic deviations from purchasing power parity. Panel evidence for OECD countries shows that international financial integration increases the national price level under managed Exchange Rate Regimes and lowers the price level under floating Exchange Rates. An open economy sticky-price model reproduces these findings by relating them to the possibility of insurance against consumption losses in internationally integRated financial markets. The utilization of insurance is reflected by relative price adjustments which manifest themselves in changes of the national price level. The direction of relative price adjustments, however, depends on the extent to which insurance is used under different Exchange Rate Regimes: under a peg, financial integration raises the national price level; under a float, however, financial integration lowers the national price level.
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international financial integration and national price levels the role of the Exchange Rate Regime
MAGKS Papers on Economics, 2011Co-Authors: Mathias Hoffmann, Peter TillmannAbstract:How does international .financial integration affect national price levels? Panel evidence for 54 industrialized and emerging countries shows that a larger ratio of foreign assets and liabilities to GDP, our measure of international .financial integration, increases the national price level under .fixed and intermediate Exchange Rate Regimes and lowers the price level under .floating Exchange Rates. This paper formulates a two-country open economy sticky-price model under either segmented or complete asset markets that is able to replicate these stylized facts. It is shown that the effect of financial integration, i.e. moving from segmented to complete asset markets, is Regime-dependent. Under managed Exchange Rates financial integration raises the national price level. Under .floating Exchange Rates, however financial integration lowers national price levels. Thus, the paper proposes a novel argument to rationalize systematic deviations from PPP.
Alejandro Werner - One of the best experts on this subject based on the ideXlab platform.
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mexico s experience with a flexible Exchange Rate Regime
Management international, 2003Co-Authors: Alfredo Cuevas, Alejandro WernerAbstract:La disponibilite d'un point d'ancrage nominal et un accroissement des mouvements des investissements et commerciaux sont consideres comme des avantages cles d'un taux de change fixe, tandis qu'un taux de change flottant assure la liberte necessaire a l'utilisation de la politique monetaire. Dans le present article, nous montrons que l'adoption d'un taux de change flottant n'a pas reduit la capacite du Mexique a diminuer l'inflation, a promouvoir le commerce et a attirer des investissements etrangers. On a egalement utilise la politique monetaire pour s'attaquer aux chocs subis par l'economie et on a obtenu de bons resultats. En outre, l'elimination des garanties explicites et implicites de taux de change empeche l'emergence de mauvais alignement des devises et d'asynchronisme des echeances dans les mouvements de capitaux et les bilans. Numeros de classification JEL : F41, N16.
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the Exchange Rate Regime and the currency composition of corpoRate debt the mexican experience
Journal of Development Economics, 2002Co-Authors: Lorenza Martinez, Alejandro WernerAbstract:Abstract This paper analyzes the effect that the change from a fixed to a floating Exchange Rate Regime that took place in Mexico in December 1994 had on the currency composition of corpoRate debt. In particular, the paper asks whether a fixed Exchange Rate Regime biases corpoRate borrowing towards foreign currency due to an implicit Exchange Rate guarantee given by the government. Therefore, under a predetermined Regime, firms will not fully internalize their Exchange Rate risk and will be more likely to engage in balance sheet mismatches than under a floating Regime. We study the main determinants of foreign currency borrowing of those firms listed in the Mexican Stock Exchange from 1992 to 2000 to test whether balance sheet currency mismatches fell after the adoption of the floating Exchange Rate Regime. The results found support the view that the floating Exchange Rate Regime has been useful in reducing Exchange Rate exposure.
Ramkishen S Rajan - One of the best experts on this subject based on the ideXlab platform.
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choice of Exchange Rate Regime currency board hong kong or monitoring band singapore
Social Science Research Network, 2003Co-Authors: Ramkishen S Rajan, Reza SiregarAbstract:Following the East Asian crisis, a number of observers have advocated that small and open economies in Asia adopt an irrevocably fixed Regime. Such a hard peg, it is argued, signals greater commitment to rule out arbitrary Exchange Rate adjustments as well as the authorities' willingness to subordinate domestic policy objectives such as output and employment growth to the maintenance of the pegged Exchange Rate. But is this a reasonable position to adopt? In order to answer this question, we consider and contrast the experiences of Hong Kong and Singapore. While both of these economies share a number of broad similarities, the former opeRates a US dollar-linked currency board arrangement and the latter maintains an adjustable peg in the form of a monitoring band arrangement with the central parity based on an undisclosed trade-weighted currency basket.
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Choice of Exchange Rate Regime: Currency Board (Hong Kong) or Monitoring Band (Singapore)?
2024Co-Authors: Ramkishen S Rajan, Reza SiregarAbstract:Following the East Asian crisis, a number of observers have advocated that small and open economies in Asia adopt an irrevocably fixed Regime. Such a hard peg, it is argued, signals greater commitment to rule out arbitrary Exchange Rate adjustments as well as the authorities' willingness to subordinate domestic policy objectives such as output and employment growth to the maintenance of the pegged Exchange Rate. But is this a reasonable position to adopt? In order to answer this question, we consider and contrast the experiences of Hong Kong and Singapore. While both of these economies share a number of broad similarities, the former opeRates a US dollar-linked currency board arrangement and the latter maintains an adjustable peg in the form of a monitoring band arrangement with the central parity based on an undisclosed trade-weighted currency basket. Copyright Blackwell Publishers Ltd/University of Adelaide and Flinders University of South Australia 2002.
