nonlinear effects of exchange rate volatility on the volume of bilateral exports in this paper we investigate empirically the impact of exchange rate volatility on real international trade flows utilizing a 13 country data set of monthly bilateral real exports for 1980 1998 we compute one month ahead exchange rate volatility from the intra monthly variations in the exchange rate to better quantify this latent variable we find that the effect of exchange rate volatility on trade flows is nonlinear depending on its interaction with the importing country s volatility of economic activity and that it varies considerably over the set of country pairs considered copyright 2003 john wiley sons ltd

multiple experiments for the causal link between the quantity and quality of children this article presents evidence on the child quantity child quality trade off using quasi experimental variation due to twin births and preferences for a mixed sibling sex composition as well as ethnic differences in the effects of these variables our sample includes groups with very high fertility an innovation in our econometric approach is the juxtaposition of results from multiple instrumental variables strategies capturing the effects of fertility over different ranges for different sorts of people to increase precision we develop an estimator that combines different instrument sets across partially overlapping parity specific subsamples our results are remarkably consistent in showing no evidence of a quantity quality trade off

do central bank forecasts influence private agents forecasting performance versus signals focusing on a set of central banks that publish their internal macroeconomic forecasts in real time enables one to shed light on the expectations channel of monetary policy the main contribution of this paper is to assess whether central bank forecasts influence private forecasts the response is positive for inflation forecasts in sweden the uk and japan to disentangle the sources of influence of central banks two concepts are proposed endogenous influence which is due to more accurate central bank forecasts and exogenous influence which is due to central bank signals on either future policy decisions or private information original empirical evidence on the central bank forecasting performance relative to private agents is provided and estimates show that in sweden more accurate inflation forecasts generate specific central bank influence that is different from the influence from signals the publication of forecasts may therefore refer to two central banking strategies that aim to shape private expectations forecasting or policymaking

information aggregation with costly information and random ordering experimental evidence the cost of information is an often ignored factor in economic situations although the information acquisition behavior of the decision makers has a crucial influence on the outcome in this experiment we study an information aggregation process in which participants decide in a random sequence participants observe predecessors decisions and can acquire additional private information at a fixed price we analyze participants information acquisition behavior and updating procedures about one half of the individuals act rationally whereas the other participants systematically overestimate the private signal value this leads to excessive signal acquisitions and reduced conformity

does inflation targeting improve fiscal discipline abstract we explore the performances of inflation targeting it adoption in terms of fiscal discipline fd while most existing studies focus exclusively on the role of fd as a precondition for it adoption using a sample of developing and developed countries we show that it adoption exerts a positive and significant effect on fd a result robust to a wide variety of alternative specifications in addition this effect is statistically significant only in developing countries a result that may fuel the current debate regarding the relevance of it adoption in general and particularly for developing countries

exchange rate volatility and intervention implications of the theory of optimum currency areas we show that variables pointed to by the theory of optimum currency areas ocas help to explain patterns of exchange rate variability and intervention across countries but oca considerations affect exchange market pressures and intervention in different ways exchange market pressures mainly reflect asymmetric shocks while intervention largely reflects the variables that oca theory suggests cause countries to value stable exchange rates small size and the extent of trade links intervention and exchange market pressure also vary with the structure of the international monetary system

estimating money demand functions the question of which functional forms of money demand regression equations are useful for empirical work is addressed here specifically it is argued that a functional form that focuses attention on the ability of the growth rate of nominal money to predict the inflation rate is a useful way of summarizing empirical evidence on the existence of a stable money demand function the results of estimating and simulating this functional form as well as standard functional forms are presented in the final part of this paper a typical equation expressing the public s demand for real money balances m is as follows

real effective exchange rate volatility and growth a framework to measure advantages of flexibility vs costs of volatility abstract by devising a real effective exchange rate reer index where bilateral exchange rates are weighted for relative trade shares we find that the reer volatility differently from the bilateral exchange rate volatility with the dollar has significant impact on growth of per capita income after controlling for other variables traditionally considered in conditional convergence estimates we also find that this cost of volatility effect can be reconciled with the concurring negative and significant effect on growth of the adoption of a fixed exchange rate regime advantage of flexibility effect where the latter may be also interpreted as the cost of choosing pegged regimes without harmonization of rules and macroeconomic policies with main trading partners the adoption of an reer volatility measure instead of a bilateral exchange rate with the dollar has the advantage of making it possible a joint test for these two effects this is because while fixed exchange rate regimes are strongly negatively correlated and almost collinear with bilateral exchange rate volatility with the dollar the correlation is much weaker when considering our reer volatility measure

central bank transparency and the volatility of exchange rates abstract we analyze the effect of monetary policy transparency on bilateral exchange rate volatility we test the theoretical predictions of a stylized model using panel data for 62 currencies from 1998 to 2010 we find strong evidence that an increase in the availability of information about monetary policy objectives decreases exchange rate volatility using interaction models we find that this effect is more pronounced for countries with a lower flexibility of goods prices a lower level of central bank conservatism and a higher interest rate sensitivity of money demand

capital controls on inflows exchange rate volatility and external vulnerability abstract we use high frequency data and a new econometric approach to evaluate the effectiveness of controls on capital inflows we focus on chile s experience during the 1990s and investigate whether controls on capital inflows reduced chile s vulnerability to external shocks we recognize that changes in the controls will affect the way in which different macro variables relate to each other in particular we consider the case where controls co exist with an exchange rate band aimed at managing the nominal exchange rate we develop a methodology to deal explicitly with the interaction between these two policies the main findings may be summarized as follows a a tightening of capital controls on inflows depreciates the exchange rate and b we find that a tightening of capital controls increases the unconditional volatility of the exchange rate but makes it less sensitive to external shocks

entry by foreign firms in the united states under exchange rate uncertainty this paper tests the effects that real exchange rate fluctuations had on foreign direct investment into the united states during the 1980s using a sample of foreign investments in sixty one four digit sic u s wholesale industries this paper finds exchange rate volatility to be negatively correlated with the number of foreign investments that occur in these industries this negative effect is most pronounced for industries where sunk investments in physical and intangible assets are relatively high although exchange rate volatility deters investment from all countries its effect was most significant for investments by japanese companies copyright 1993 by mit press

should the exchange rate be a shock absorber this paper examines the welfare case for the exchange rate as a shock absorber cushioning an economy in face of shocks to world demand for its good we provide an example in which although the exchange rate acts perfectly as a shock absorber stabilizing output around the natural rate and eliminating the impact of nominal rigidities it may in fact be better to prevent the exchange rate from adjusting at all the explanation for this is that with incomplete international financial markets the natural rate is inefficient it does not respond enough to demand shocks while fixing the exchange rate increases the volatility of consumption the pro cyclical nature of monetary policy under a fixed exchange rate allows for a more efficient composition of consumption between home and foreign goods furthermore for the shocks examined a welfare maximizing monetary rule always dampens exchange rate volatility relative to that of a free float and in some cases may imply a fixed exchange rate d 2004 elsevier b v all rigths reserved

the long run volatility puzzle of the real exchange rate abstract this paper documents large cross country differences in the long run volatility of the real exchange rate it shows that the real exchange rate of developing countries is approximately three times more volatile than the real exchange rate in industrial countries the paper shows that this difference in volatility cannot be explained by the fact that developing countries face larger shocks both real and nominal recurrent currency crises or by different elasticities to these shocks arch estimations find a much higher persistence of deviations of the variance of the rer from its long run value when the economy suffers shocks of various kinds

currency crashes in emerging markets an empirical treatment we use a panel of annual data for over 100 developing countries from 1971 through 1992 to characterize currency crashes we define a currency crash as a large change of the nominal exchange rate that is also a substantial increase in the rate of change of nominal depreciation we examine the composition of the debt as well as its level and a variety of other macroeconomic factors external and foreign crashes tend to occur when output growth is low the growth of domestic credit is high and the level of foreign interest rates are high a low ratio of fdi to debt is consistently associated with a high likelihood of a crash

a stop too far how does public transportation concentration influence neighbourhood median household income research on us cities has connected the concentration of public transit with various neighbourhood outcomes but it remains unclear whether public transit was more attractive to lower or higher income households some research found neighbourhoods with public transportation were more attractive to lower income households likely because such households could not afford private transportation closer examination suggested that the type of transit was important as lower income households were more likely to use buses while higher income households were more likely to use rapid transit a key limitation of existing research on transit and neighbourhood household income was that it did not adequately control for variation over time the current study addresses this limitation by assessing how the concentration of subway and bus stops predicted variation in median household income in new york city during the 2000s results of cross sectional regressions partially confirm the findings of previous research that

anticipations of monetary policy in financial markets in recent years financial markets appear better able to anticipate federal open market committee fomc policy changes beginning in the late 1980s and early 1990s longer term interest rates and futures rates have tended to incorporate movements in the federal funds rate several months in advance in contrast to the largely contemporaneous response typically observed before that time after identifying these emerging trends the paper parses the enhanced predictability into a component that can be attributed to the autoregressive behavior of the funds rate and a nonautoregressive component the paper considers institutional developments in fomc policy making that may have contributed to each of these components including gradualism in adjusting the federal funds rate target and transparency regarding the setting of the target and future policy intentions

real exchange rate uncertainty private investment in ldcs this paper examines empirically the link between real exchange rate uncertainty and private investment in developing countries using a large cross country time series data set the paper builds a garch based measure of real exchange rate volatility and finds that it has a strong negative effect on investment after controlling for other standard investment determinants and taking into account their potential endogeneity the effect of uncertainty is not uniform however there is some evidence of threshold effects so that uncertainty only matters when it exceeds some critical level in addition the negative effect of real exchange rate uncertainty on investment is significantly larger in economies that are highly open and in those with less developed financial systems

the dynamics of exchange rate regimes fixes floats and flips the impermanence of fixed exchange rates has become a stylized fact in international finance the combination of the mirage view that pegs do not really peg with the fear of floating view that floats do not really float generates the conclusion that exchange rate regimes are in practice unimportant for the behavior of the exchange rate this is consistent with evidence on the irrelevance of exchange rate regimes for general macroeconomic performance recent studies however show that the exchange rate regime matters this can be understood by considering the dynamics of exchange rate regimes we demonstrate that the mirage view is somewhat misleading and incomplete pegs frequently break but many do last also there is a high degree of flipping that is the re formation of pegs that have broken thus a fixed exchange rate today is a good predictor that one will exist in the future we also investigate the quantitative effect of fixed exchange rates while the fear of floating view suggests little actual difference in fixed and floating rates with respect to exchange rate volatility we show that fixed exchange rates exhibit considerably greater bilateral exchange rate stability than flexible rates both today and in the future 2007 elsevier b v all rights reserved

a stable international monetary system emerges inflation targeting is bretton woods reversed a stable international monetary system has emerged since the early 1990s a large number of industrial and a growing number of developing countries now have domestic inflation targets administered by independent and transparent central banks these countries place few restrictions on capital mobility and allow their exchange rates to float the domestic focus of monetary policy in these countries does not have any obvious international cost inflation targeters have lower exchange rate volatility and less frequent sudden stops of capital flows than similar countries that do not target inflation inflation targeting countries also do not have current accounts or international reserves that look different from other countries this system was not planned and does not rely on international coordination there is no role for a center country the imf or gold it is durable in contrast to other monetary regimes no country has been forced to abandon an inflation targeting regime succinctly it is the diametric opposite of the post war system bretton woods reversed

nominal exchange rate volatility relative price volatility and the real exchange rate abstract we model real exchange rate nominal exchange rate and relative price volatility using real and nominal factors we analyze these volatility measures across developing and industrialized countries we find that the inclusion of nominal factors achieves a sizable reduction in the real exchange rate volatility spread between developing and industrialized countries in addition we find that nominal factors matter to real exchange rate volatility in the short run and the long run and that for developing countries a higher share of real exchange rate volatility stems from relative price volatility