New price adjustments reshape the world, yet again

Angus Deaton, Bettina Aten, 16 July 2014

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When the international comparison project (ICP) published its latest estimates of purchasing power parity (PPP) exchange rates in April (World Bank 2014), there was considerable surprise and some consternation. Poor countries became richer overnight, at least relative to the rich countries; expressed in US dollars, world average GDP increased.

Topics: Development, Exchange rates
Tags: exchange rates, PPP, World Bank

Eurozone external adjustment and real exchange rate movements: The role of firm productivity distribution

Filippo di Mauro, Francesco Pappadà, 2 June 2014

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A corollary of the Eurozone crisis has been an unusually large current-account surplus for the Eurozone as a whole, resulting from a combination of strong external demand and rapid readjustment of external accounts in the Eurozone countries that had previously accumulated large imbalances.

Topics: Europe's nations and regions, Exchange rates
Tags: eurozone, exchange rates, exports, imbalances, productivity, rebalancing

The transmission of Federal Reserve tapering news to emerging financial markets

Joshua Aizenman, Mahir Binici, Michael M Hutchison, 4 April 2014

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The quantitative easing (QE) policies of the US Federal Reserve in the years following the crisis of 2008–2009 included monthly securities purchases of long-term Treasury bonds and mortgage-backed securities totalling $85 billion in 2013. The cumulative outcome of these policies has been an unprecedented increase of the monetary base, mitigating the deflationary pressure of the crisis.

Topics: Exchange rates, International finance, Monetary policy
Tags: asset prices, Credit Default Swaps, emerging markets, exchange rates, Federal Reserve, stock markets, tapering

Managing the exchange rate: It's not how much, but how

Atish R Ghosh, Jonathan D Ostry, Mahvash Saeed Qureshi, 2 April 2014

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The choice of exchange rate regime is a perennial issue faced by emerging markets. Conventional wisdom, especially after the emerging markets crises of the late 1990s, was the bipolar prescription: countries should choose between either floats (the soft end of the prescription) or hard pegs (monetary union, dollarisation, currency board).

Topics: Exchange rates
Tags: emerging markets, exchange rates, managing floats

The credit cycle and vulnerabilities in emerging economies: the case of Latin America

Julián Caballero, Ugo Panizza, Andrew Powell, 2 April 2014

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Over recent years credit growth in Latin America has been very strong, and countries have become more reliant on foreign bond issuances. These phenomena are linked, and in Caballero et al. (2014), we argue that they may have led to vulnerabilities which domestic and international supervisors are not well-equipped to assess.

Topics: Exchange rates, Financial markets, International finance
Tags: carry trade, credit conditions, exchange rates, Latin America, original sin

How did the Global Financial Crisis misalign East Asian currencies?

Eiji Ogawa, Zhiqian Wang, 19 January 2014

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Some East Asian countries experienced a serious currency crisis in 1997. The crisis was blamed on both the de facto US dollar peg system and double mismatches of domestic financial institutions’ balance sheets in terms of currency and maturity. Following the Asian currency crisis, recognition of the importance of regional monetary cooperation has steadily grown.

Topics: Exchange rates, International finance
Tags: currency crisis, East Asian financial crisis, exchange rates, financial crisis, global financial crisis

Policymaking in crises: Pick your poison

Kristin Forbes, Michael W Klein, 24 December 2013

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In 2010, the Brazilian finance minister Guido Mantenga declared a ‘currency war’ because of the harmful effects of the strengthening of the real. He blamed the currency’s appreciation on easy money in advanced countries, and to a lesser extent on reserve accumulation in some emerging markets.

Topics: Exchange rates, Macroeconomic policy
Tags: Brazil, capital controls, currency war, exchange rates, foreign exchange reserves, global financial crisis, India, Indonesia

Tapering talk: The impact of expectations of reduced Federal Reserve security purchases on emerging markets

Barry Eichengreen, Poonam Gupta, 19 December 2013

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In May 2013, Federal Reserve officials first began to talk of the possibility of the US central bank tapering its securities purchases from $85 billion a month to something lower. A milestone to which many observers point is 22 May 2013, when Chairman Bernanke raised the possibility of tapering in his testimony to Congress.

Topics: Exchange rates, Monetary policy
Tags: capital controls, Capital inflows, currency war, emerging markets, exchange rates, Federal Reserve, Macroprudential policies, monetary policy, tapering

Are exchange rates predictable?

Barbara Rossi , 14 November 2013

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The predictability of exchange rates is a crucial question in international finance and macroeconomics. Policy decisions of central banks and policymakers all over the world rely, directly or indirectly, on exchange rate forecasts. The same holds for private business and practitioners' decisions.

Topics: Exchange rates
Tags: exchange rates, forecasting, predictions, random walk

Should Brazil’s central bank be selling foreign reserves?

Márcio Garcia, 25 September 2013

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The US dollar’s rise in August and the Brazilian Central Bank’s (BCB) interventions in forex markets have started a debate about whether the BCB should keep on intervening as it has been doing, mostly via currency derivatives markets, or if it should also be selling its international reserves.

Topics: Exchange rates, International finance
Tags: Brazil, capital flows, Central Banks, derivatives, exchange rates

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