Exchange Rate Economics: Theories and Evidence

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Figures 1.1 The balance of payments model of the determination of the exchange rates 9 1.2 Exchange rate bands 10 1.3 Multiple equilibria in the foreign exchange markets 11 1.4 The joint determination of the spot and forward exchange rates 15 1.5 (a) UK pound sterling per US dollar,actual change and forward premium. (b) Japanese yen per US dollar,actual change and forward premium. (c) German Deutschemark per US dollar, actual change and forward premium 22 1.6 Time series of traditional fundamentals,benchmark flexible-price model 25 1.7 Time series of benchmark virtual fundamentals 26 1.8 (a) UK pound sterling per US dollar,nominal and real rates. (b) Japanese yen per US dollar,nominal and real rates. (c) German Deutschemark per US dollar,nominal and real rates 27 2.1 PPP and the neutral band 42 4.1 An endowment change in the monetary model 104 5.1 The Mundell–Fleming model 108 5.2 Monetary expansion in the MF model 110 5.3 Fiscal policy and the MF model 111 5.4 The insulation properties of the MF model with respect to a foreign interest rate shock 112 5.5 Monetary expansion and imperfect capital mobility 113 5.6 Fiscal expansion and imperfect capital mobility 114 5.7 The phase diagram representation of the SPMA model 117 5.8 Unanticipated and anticipated decreases in the money supply 118 5.9 The dynamic behaviour of the exchange rate and price level, when the exchange rate is a deflator of real money balances 121 5.10 Goods market wealth effect dominates money market wealth effect 122 5.11 Money market wealth effect dominates goods market wealth effect 122 5.12 Unanticipated reduction in the rate of monetary growth in the Buiter–Miller model 126
x Figures 5.13 Level and growth changes in the money supply 127 6.1 Actual and theoretical spread 162 7.1 Equilibrium in dynamic currency substitution model 1 172 7.2 Open market purchase of foreign money for domestic money 172 7.3 Currency substitution with perfect foresight and non-traded good 175 7.4 Increased monetary expansion in currency substitution model 2 176 7.5 Asset market equilibrium 182 7.6 Goods market equilibrium 183 7.7 Asset and goods market equilibrium in the portfolio balance model 184 7.8 An open market purchase of bonds for money 185 7.9 The adjustment profiles of (a) the trade account,(b) the capital account and (c) the exchange rate 187 7.10 An increase in the supply of bonds and currency depreciation 188 7.11 An increase in the supply of bonds which causes currency appreciation 188 7.12 A shift in asset preferences 190 9.1 US BEER 234 9.2 US BEER,Counterfactual L,NFA at 1980 values (post-1980) 235 9.3 Sources of $/DM real exchange rate fluctuations 238 9.4 Effective exchange rate misalignments 239 10.1 Short-run equilibrium in NOEM 260 10.2 Unexpected relative rise in home money in NOEM 262 10.3 An unexpected temporary increase in home G 265 10.4 Unexpected relative rise in domestic productivity 267 12.1 The S function 291 12.2 Monetary policy and a family of S curves 293 12.3 The S schedule in S–f space 294 12.4 Smooth pasting in this sticky-price monetary model 296 12.5 Expected rate of devaluation (95% conf.i.): 3 months – (a) BF/DM,(b) DK/DM,(c) FF/DM,(d) IL/DM, (e) IP/DM and (f) NG/DM 299 12.6 Ninety-five confidence intervals for expected depreciation in Bretton Woods: (a) of deutsche mark (b) of sterling 300 12.7 Expected realignment rate,95% CI,franc-sterling,Classical Gold Standard 301 12.8 Expected realignment rate,95% CI,dollar-sterling,Classical Gold Standard 301 12.9 Intra-marginal interventions 305 12.10 Components of the interest differential 309 12.11 Impulse response functions for system 2 311 13.1 First generation speculative attack model 316 13.2 The dynamics of the crisis 318 13.3 Second generation speculative attack model 320 13.4 Base line MF model 324 13.5 Third generation speculative attack model 325
Page 2: Exchange Rate Economics Exchange Ra
Page 5 and 6: Firstpublished2007 by Routledge 2Pa
Page 8 and 9: Contents List of figures List of ta
Page 12 and 13: Figures 13.6 Fourth generation spec
Page 14: Preface This book is the second edi
Page 17 and 18: 2 Introduction Although the textboo
Page 19 and 20: 4 Introduction (orders to buy/sell
Page 21 and 22: 6 Introduction Table 1.3 Currency d
Page 23 and 24: 8 Introduction a truly flexible exc
Page 25 and 26: 10 Introduction this has to be sati
Page 27 and 28: 12 Introduction likely that the rel
Page 29 and 30: 14 Introduction or F (1 + i) = S (1
Page 31 and 32: 16 Introduction Consider now a fall
Page 33 and 34: 18 Introduction The empirical evide
Page 35 and 36: 20 Introduction (mean and variance)
Page 37 and 38: 22 Introduction (a) (b) 0.3 0.25 0.
Page 39 and 40: 24 Introduction clusters or that it
Page 41 and 42: 26 Introduction 0.1 0.05 0 -0.05 -0
Page 43 and 44: 28 Introduction 1.9 Exchange rate r
Page 45 and 46: 30 Introduction fixed versus flexib
Page 47 and 48: 32 Introduction influences. For exa
Page 49 and 50: 34 Introduction 1.11 The determinan
Page 51 and 52: 36 Introduction In the standard OCA
Page 53 and 54: 38 Introduction most transactions i
Page 55 and 56: 40 Purchasing power parity and the
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46 Purchasing power parity and the
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3 The economics of the PPP puzzle I
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70 The economics of the PPP puzzle
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4 The flexible price monetary appro
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96 The flexible price monetary appr
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98 The flexible price monetary appr
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100 The flexible price monetary app
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5 The sticky-price monetary model I
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108 The sticky-price monetary model
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6 The monetaryapproach to the excha
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136 Empirical evidence on the monet
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Table 6.5 SEM equations: United Kin
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7 Currencysubstitution models and t
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168 Currency substitution and portf
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200 Real exchange rate determinatio
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228 Equilibrium exchange rates rate
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230 Equilibrium exchange rates A nu
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232 Equilibrium exchange rates long
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234 Equilibrium exchange rates 5.1
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236 Equilibrium exchange rates term
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238 Equilibrium exchange rates 0.30
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240 Equilibrium exchange rates Detk
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242 Equilibrium exchange rates US i
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244 Equilibrium exchange rates The
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246 Equilibrium exchange rates 9.6.
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248 Equilibrium exchange rates 9.6.
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250 Equilibrium exchange rates Conc
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252 The new open economy macroecono
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11 The new open economy macroeconom
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290 Target zone models 12.1 The bas
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292 Target zone models stochastic c
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294 Target zone models moves from 2
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296 Target zone models where A 1 an
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298 Target zone models expected dev
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300 Target zone models % expected d
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302 Target zone models MacDonald (2
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304 Target zone models for the DM-l
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306 Target zone models explicit ban
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308 Target zone models Table 12.1 F
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310 Target zone models short-term i
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312 Target zone models the UK short
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314 Speculative attack models and c
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340 Market microstructure approach
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15 Spot and forward exchange rates
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Notes 1 Introduction: some basic co
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398 Notes 4 Although the split betw
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400 Notes 3 The fact that the utili
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402 Notes 15 This result is familia
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404 Notes 6 Where ∫ ∞ vg(v) E(v
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406 References Artis,M. and M. Lewi
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408 References Bergin,P.,R. Glick a
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410 References Calvo,G.A. and C.A.
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412 References Clark,P.B. and R. Ma
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414 References Detken,C.,A. Dieppe,
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416 References Edwards,S. and I. Ma
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418 References Fischer,S. (2001),
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420 References Frieden,J.P.G. and E
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422 References Granger,C.W. and T.
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424 References Hooper,P. and J. Mor
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426 References Kearney,C. and R. Ma
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428 References Lewis,K. (1988),‘T
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430 References MacDonald,R. (2002),
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432 References Mark,N.C. (2001),Int
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434 References Obstfeld,M. and K. R
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436 References Roll,R. (1979),‘Vi
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438 References Tauchen,G.E. and M.
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Index Abadir,K. 389 Abuaf,N. 60 Adl
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442 Index Diba,B. 177-8 Dickey,D.A.
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444 Index Gagnon,J. 212 Gali,J. 128
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446 Index Miller,M.H. 120,123,128,1
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448 Index purchasing power parity (
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450 Index trade: interbank trade 34
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Exchange Rate Economics: Theories and Evidence

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