By disaggregating price indices, it becomes apparent that the real exchange rate consists of the real exchange rate for a single good and a weighted sum of relative prices between goods. When applying a battery of panel unit root tests to this sum and its components, it is found that both the sum and the relative prices are non-stationary. This implies that PPP is invalid even if the LOP holds ...

This paper analyzes the behaviour and motivation of fund managers in foreign exchange markets reflected in questionnaire evidence. We find that fund managers and FX dealers differ significantly. Fund managers rely more on fundamentals, basically due to their longer forecasting horizons, and reject non-fundamental influences on exchange rates more than FX dealers. However, neither can fund manag...

Revealed comparative advantage indices are calculated for China (1980-2000 period) and the Chinese provinces (1990-1998 period) and then incorporated into a reduced form export equation. The results of China’s export patterns show that China has moved from a heavy industry-oriented development strategy to a comparative advantage one, with, however, marked differences among provinces. The econom...

The profitability of chartist trading rules on foreign exchange markets is still under debate. Since simple technical trading rules may not adequately capture the complex phenomenon of chartist trading, this paper focuses on the prominent head-and-shoulder pattern as a representative trading rule which incorporates various „technical“ ideas such as smoothed trends, trend reversal, resistance le...

Foreign exchange transactions are subject to a unique type of settlement risk. This risk ultimately stems from the difficulty of coordinating separate settlements in two different currencies. Settlement of foreign exchange transactions through the proposed CLS (“Continuous Linked Settlement”) Bank has been discussed as a potential solution to this problem. This paper describes the CLS proposal ...

This article investigates the forward market efficiency by testing the unbiased forward exchange rate hypothesis using nine currencies vis-à-vis the U.S. dollar. The empirical tests are conducted using monthly data during the period between January 1985 and December 1996 and two different methods of cointegration tests, a fractional (GPH) test and the HarrisInder test. The two cointegration tes...

This study examines profits and speculation in the USD/EUR trading of a bank in Germany over a four-month period. Dealing activity at the bank generates profits but speculation does not seem to contribute to this. We find that speculative positions fail to become profitable within a 30-minutes' horizon. Also, the suggestion that exchange rate volatility would foster speculative profits cannot b...

The study examines the asymmetric effect of oil price on exchange rate and stock using Nonlinear Autoregressive Distributive Lag (NARDL) technique time-series data spanning from January 1996 to September 2020. multivariate cointegration test showed evidence a long-run relationship among price, rate, price. linear Granger causality that is granger caused by cause rate. nonlinear nonlinearity BDS...

We assess the progress made by the profession in understanding real exchange rate behavior through a selective and critical, but nonetheless expository, review of the literature. Our reading of the literature leads us to the main conclusions that purchasing power parity might be viewed as a valid long-run international parity condition when applied to bilateral exchange rates obtaining among ma...

This article examines how financial constraints and product market exposures determine the response of multinational and local firms to sharp depreciations. U.S. multinational affiliates increase sales, assets, and investment significantly more than local firms during, and subsequent to, depreciations. Differing product market exposures do not explain these differences in performance. Instead, ...