Exchange Rate Economics: Theories and Evidence

Index 447
unexpected relative rise in home money in
262,wealth transfers and the current
account 257–8
nominal effective exchange rate (NEER) 3
nominal exchange rates 2;
fundamentals-based approach 94
non-borrowed reserves to total reserves (nbrx)
223; as the measure of monetary
policy 223
non-tradables,competitiveness measure in
399 n.17
Oates,W. 178
Obstfeld,M. 20,27,71–2,75,86,106–7,
128,197–8,216,228,248–9,251,255–6,
258–9,263,267,272–3,277–8,281–2,
285,305,313,317,319,321
O’Connell,P. 62,72
Oh,K.-Y. 60
O’Hara,M. 339,357,362
Ohare,H. 212
one-step-ahead restrictions test
401 n.7 (chap.6)
optimal currency area (OCA) 34
order flow variable and price 359–67; foreign
exchange microstructural models 360; ‘hot
potato’ view 361–2; information
processing stages 360; Killeen,Lyons and
Moore (KLM) hypothesis 367;
portfolio-balance approach to the exchange
rate 364; Rueters D2000–1 trading system
361,363,366; temporary and persistent
portfolio-balance effects 365–6
Ostry,J.D. 248
Overturf,S.F. 356
Ozaki,T. 72
Papell,D.H. 62
Parsley,D. 60,62,67,69–71
Patel,J. 52
Pauls,B. Diane 207
Pedroni,P. 56
perfect capital mobility 19,113
permanent equilibrium exchange rate (PEER)
240; PEERS permanent and transitory
components of real exchange rates 236–43
Perron,P. 57–8
Peruga,R. 378,381
Pfleiderer,P. 354,357,362
Phillips,P.C.B. 56
Pill,H. 323
Pitt,M. 348–50
portfolio balance approach/models,to the
exchange rate 178–84,401 n.14;
asset market equilibrium 182–4; for
Canadian–US exchange rates 197;
Cobb–Douglas formulation 180;
econometric evidence on 194–8; goods
market equilibrium 183–4;
Mundell–Fleming–Dornbusch model 178;
for sterling–dollar exchange rate 198
post-Bretton Woods phenomenon,51
PPP puzzle,economics of 39–93,see also under
purchasing power parity: market structure
and the real exchange rate 77–85,
Johansen multivariate cointegration
method 84,pricing to market and
pass-through 77–8, see also under pricing to
market (PTM); market structure and the
role of the distribution sector 86–8,price
equalization of tradable goods 87;
non-traded to traded goods,productivity
differences and the relative price of 73–7,
Balassa–Samuelson effect,testing for 75–6,
Balassa–Samuelson hypothesis 73–5,
demand side and the internal price ratio
77,testing using measures of productivity
76–7; pricing to market (PTM),and PPP
puzzle 77–8,empirical evidence 80–5,
theory 78–80; productivity redux and the
imperfect substitutability of internationally
traded goods 88–93,Balassa–Samuelson
theoretical results 88–91,Dixit–Stiglitz
framework 89–90,non-tradables drops,
coefficient of productivity on 92;
transaction costs,the neutral band and non
non-linear mean reversion 69–73,macro
effect 70,panel methods 70,relative price
volatility 70,transactions costs and
non-linear adjustment 71–3, see also Band
Threshold Autoregressive (B-TAR) model;
exponentially autoregressive (EAR) model;
smooth transition autoregressive (SETAR)
model; transactions costs versus nominal
exchange rate volatility 69–71
Prasad,E. 219–20,222,287
Prat,G. 393
price puzzle 225
product/country fixed effects 398 n.7
productivity,definition 398 n.2
purchasing power parity (PPP) and the PPP
puzzle 39–67; absolute PPP (APPP) 41,
restrictiveness of 41; asset view of 43;
cointegration-based tests 52–7,basic
message from 53,Dickey–Fuller statistics
53–4,Engle–Granger method 53–4,
Engle–Granger two-step regression 53–4,
multivariate cointegration tests 55,
panel cointegration methods 56,wholesale
and consumer prices (WPI and CPI) 54;