In this paper, I consider modeling the effects of the macroeconomic determinants on the nominal exchange rate to be channeled through the transition probabilities in a Markovian process. The model posits that the deviation of the exchange rate from its fundamental value alters the market’s belief in the probability of the process staying in certain regime next period. This paper further takes i...

In addition to transferring about 16 percent of GDP from exporters to importers, Uzbekistan’s quasi-fiscal multiple exchange rate regime generates identifiable welfare losses of 2–8 percent of GDP on import markets and up to 15 percent on export markets. These excess burdens have increased substantially with the growing difference among exchange rates. The welfare analysis allows some conclusio...

We have introduced an early warning system for volatility regimes regarding Tehran Stock Exchange using Markov Switching GARCH approach. We have examined whether Tehran Stock Market has calmed down or more specifically, whether the surge in volatility during 2007-2010 global financial crises still affects stock return volatility in Iran.  Doing so, we have used a regime switching GARCH model.  ...

Banking crises are fairly ubiquitous events with large adverse consequences. This paper studies the potential for banking crises and their effects on exchange rate policies in a microfounded general equilibrium dynamic model in the tradition of Diamond and Dybvig (1983) and Chang and Velasco (2000). More specifically, we produce a small open economy pure exchange overlapping generations model w...

This paper studies the survival of fixed exchange rate regimes. The probability of an exit from a fixed exchange rate regime depends on the time spent within this regime. In such a context durations models are appropriate, in particular because of the possible non-monotonic pattern of duration dependence. Non-parametric estimates show that the pattern of duration dependence exhibits non-monoton...

This paper offers new insights into the nature of exchange rate pass through modelling in the context of a Markov regime-switching environment. Using New Zealand data, the results indicate that pass through to import prices resulting from fluctuations in the exchange rate or exporter costs can be characterised as regime-specific. Furthermore, there is evidence that the probability of switching ...

This paper analyzes FDI and exchange rate nexus in the context of Japanese direct investment in China. Using the data of Japanese direct investment in China’s nine manufacturing sectors from 1981 to 2001, the paper found that, there exists a significantly positive correlation between the bilateral real exchange rate of yen to yuan and Japanese direct investment in China. Specifically, the appre...

This paper provides evidence of heterogeneous treatment effects on trade for six different types of exchange rate regime transitions, utilizing data on 218,643 country-pair-year observations all together. Previous research mainly focused on the currency union effect on trade and widely assumed that country-pairs with identical observable characteristics receive the same effect. We test the hypo...

This paper explores the effects of government consumption spending in a small open economy both under flexible and fixed exchange rate regimes. Varying price elasticity and the variety effect due to firm entry, are introduced to match the empirical evidences on the small open economy. The main mechanism is that firm entry leads to a higher price elasticity (hence variable markup), and increasin...

Title of Document: ESSAYS ON INTERNATIONAL FINANCE Fernando Gabriel Im, Doctor of Philosophy, 2012 Directed By: Professor Carmen Reinhart, Department of Economics Professor Carlos Végh, Department of Economics In the first paper, I use industry-level data to investigate the impact of exchange rate arrangements on the productive structure of the economy. The identification strategy has similarit...