Relationships between exchange rate regime, real exchange rate volatility and currency structure of government bonds in emerging markets

International Asset Markets And Real Exchange Rate Volatility

The real exchange rate is very volatile relative to major macroeconomic aggregates and its correlation with the ratio of domestic over foreign consumption is negative (Backus-Smith puzzle). These two observations constitute a puzzle to standard international macroeconomic theory. This paper develops a two country model with complete asset markets and limited enforcement for international financ...

The Impact of Monetary Regime on the Exchange Rate Pass-Through under Exchange Rate Volatility (Dynamic Panel Data Approach)

Board of Governors of the Federal Reserve System International Asset Markets and Real Exchange Rate Volatility International Asset Markets and Real Exchange Rate Volatility *

The real exchange rate is very volatile relative to major macroeconomic aggregates and its correlation with the ratio of domestic over foreign consumption is negative (BackusSmith puzzle). These two observations constitute a puzzle to standard international macroeconomic theory. This paper develops a two country model with complete asset markets and limited enforcement for international financi...

Investigating the Short- run and Long-run Causality Relationship between the Exchange Rate Regime and the Real Exchange Rate Misalignment in the OPEC Countries

Real exchange rate misalignment means that the real exchange rate deviates from its equilibrium level and is the cause of many domestic and global economic problems. This index is considered as an important indicator in foreign competition and in case of adopting an inappropriate exchange rate regime; it may create economic instability and affect economic performance. This issue is important in...

An Empirical Investigation into Exchange Rate Regime Choice and Exchange Rate Volatility

We test a simple model of exchange rate regime choice with data for 65 non-OECD countries covering the period 1980-94. We find that the variance of output at home and in potential target countries as well as the correlation between home and foreign real activity are powerful and robust predictors of exchange rate regime choice. Surprisingly, a more volatile foreign economy can be an argument in...