Recent research has revealed a wealth of information about the microeconomics of currency markets and thus the determination of exchange rates at short horizons. This information should help in designing exchange-rate models. This paper analyzes an existing model that was previously demonstrated to be consistent with most of the major puzzles that have emerged under floating rates. It shows tha...

We implement novel tests of general relative purchasing power parity (PPP), defined as a long-run unit elasticity of the nominal exchange rate with respect to relative national prices, allowing for potentially permanent real exchange rate shocks. The finite-sample properties of the estimators used are analyzed through Monte Carlo analysis, allowing for country heterogeneity, cross-sectional dep...

We present an empirical investigation of the hypotheses that exchange rate volatility may have an impact on both the volume and variability of trade flows by considering a broad set of industrial countries’ bilateral real trade flows over the period 1980–1998. Similar to the findings of earlier theoretical and empirical research, our first set of results shows that the impact of exchange rate u...

We estimate the exposure of emerging-market companies to fluctuations in their domestic exchange rates. We use an instrumental-variable approach that identifies the total exposure of a company to exchange-rate movements, yet abstracts from the influence of confounding macroeconomic shocks. We find the impact of depreciations on emerging-market stock returns is overwhelmingly negative. Since we ...

We examine the mean-reverting properties of real exchange rates, by comparing the unit root properties of a group of international real exchange rates with two groups of intranational real exchange rates. Strikingly, we find that while the international real rates taken as a group appear mean reverting, the intranational rates are not. This is consistent with the view that while nominal shocks ...

Abstract This paper focuses on emerging market government bonds issued in local currency with different maturities. Foreign investors face interest rate, currency, and credit risks. We consider the entire term structure of carry trade returns find that, while default premium does not contribute to strategies, contribution rate risk, captured by premium, is large increases maturity. introduce ri...

abstract i n this paper, we investigate the existence and the nature of real exchange rate misalignment in organization of the petroleum exporting countries (opec). to do this we estimated a cross country basic real exchange rate determination model for 1990-2012 and extracted historic trend of misalignment. the results imply that all opec countries have had misalignment -of different kinds tho...

The behavior of exchange rate in various exchange markets is not seemingly predictable, while there are different forecasting methods to do so. One of these methods is to use fractals to identify exchange rate behavior. This paper has made attempts to explore the properties of fractals in Iran’s exchange market in order to it can predict and analyze the trend of exchange rate. Accordingly, th...