We investigate monthly bilateral exchange rate volatility for a large sample of currency pairs over the period 1999–2006. Pegs (particularly to the US dollar) and managed floats tend to have lower ...volatility than independent floats. A deeper investigation shows that the peg effect operates almost entirely through currency networks (i.e. where two currencies are pegged to the same anchor currency), and the lower volatility of US dollar pegs reflects the size of the US dollar network. Managed floats show clear evidence of tracking the US dollar, further increasing the effective size of the US dollar network. Inflation undermines the currency-stabilizing effect of peg networks. Currencies in smaller peg networks have higher unweighted but not trade-weighted exchange rate volatility, which is consistent with anchors being chosen to minimize trade-weighted volatility. The size of the effective US dollar network revealed here is a plausible explanation of the rarity of basket pegs. Volatility also reflects a range of structural factors such as country size, level of development, population density, inflation differentials and business cycle asymmetry.
Technical progress can be expected to reduce transport costs over time, yet most studies of bilateral trade based on the gravity model find distance effects to be increasing rather than decreasing. ...We investigate countries' openness to international trade (the ratio of exports plus imports to GDP). We find that trade decreases with geographical remoteness, land area and lack of access to the sea, all of which are likely to be correlated with transport costs. In contrast to the results obtained with log‐linear models of bilateral trade, distance effects (remoteness and land area) have declined over time. Trade decreases with population density and increases with improvements in the terms of trade, investment and a more liberal trade policy.
Previous research on the incompatibility of a pegged exchange rate, capital mobility, and monetary independence (the open-economy trilemma), based on the degree to which domestic interest rates ...follow foreign rates, has produced mixed results. Despite its centrality to other areas of investigation, such as currency crises, the role of the credibility of the peg has hitherto been ignored. Fluctuations in perceived devaluation probabilities will move domestic interest rates, given foreign interest rates, even if countries have no genuine monetary independence. Using data for 126 countries from 1990, it is shown that countries on credible pegs without capital controls follow foreign interest rates closely, and that the hypothesis of complete lack of monetary independence cannot be rejected in this case. Our findings are robust to alternative measures of credibility (inflation differentials; types of peg), and to different ways of classifying exchange rate regimes and identifying capital controls.
ABSTRACT
Hanushek and Kimko's analysis of the relationship between growth and schooling quality, as measured by scores in international tests, suffers from potential endogeneity as schooling quality ...is not always measured at a date strictly prior to the observed growth. To address this problem we treat the data as a panel, relating growth only to test scores at earlier dates. The estimates of the effect of schooling quality on growth are similar to those obtained from cross‐section regressions.
Real effective exchange rate volatility is examined for 90 countries using monthly data from January 1990 to June 2006. Volatility decreases with openness to international trade and per capita GDP, ...and increases with inflation, particularly under a horizontal peg or band, and with terms-of-trade volatility. The choice of exchange rate regime matters. After controlling for these effects, an independent float adds at least 45% to the standard deviation of the real effective exchange rate, relative to a conventional peg, but most other regimes make little difference. The results are robust to alternative volatility measures and to sample selection bias.
The puzzle that real exchange rates are less volatile in open economies is an important challenge to exchange rate theory. Adjustment of domestic prices to nominal exchange rate movements can account ...for only a small proportion of this effect. Real and nominal shocks display no obvious correlation with openness. It is shown here that real effective exchange rates are more strongly mean-reverting in more open economies, even after controlling for exchange rate regime effects. This is predicted by the theory of current account sustainability, because of its emphasis on ratios to GDP rather than to trade flows.
Abstract
We use Synthetic Control Methodology to estimate the output loss in Tunisia as a result of the “Arab Spring.” Our results suggest that the loss was 5.5 percent, 5.1 percent, and 6.4 percent ...of GDP in 2011, 2012, and 2013 respectively. These findings are robust to a series of tests, including placebo tests, and are consistent with those from an Autoregressive Distributed Lag Model of Tunisia’s economic growth. Moreover, we find that investment was the main channel through which the economy was adversely impacted by the Arab Spring.
Efficiency, innovation and exports Bleaney, Michael; Wakelin, Katharine
Oxford bulletin of economics and statistics,
February 2002, Letnik:
64, Številka:
1
Journal Article
Recenzirano
Previous research (on countries other than the UK) finds better-performing firms to be more likely to export. We test this hypothesis for UK firms. The relationship between exporting and firm ...variables is significantly different for firms that have experienced a major innovation ("innovating firms"). Noninnovating firms are more likely to export if they have lower unit labour costs, whilst innovating firms are more likely to do so if they have had more innovations. Ceteris paribus, the probability that a firm is an exporter is higher if it is in a sector with high R&D expenditures (relative to output), which is consistent with product cycle theories of trade. For non-innovators, firms are also more likely to be exporters in sectors with low capital intensity. Copyright 2002 by Blackwell Publishing Ltd
Recent contributions to the empirical growth literature show no tendency to convergence in specification, as researchers seek to identify new variables that can account for significant regional ...effects in earlier work. We conduct non-nested tests between the models of Barro (1997), Easterly and Levine (1997) and Sachs and Warner (1997). The data strongly prefer an encompassing model, but fail to reject any of the candidate models, implying that each model represents a partial truth. We identify a model that includes most (but not all) of the regressors in the candidate models and is robust to the inclusion of regional dummies.
The median developing country has had significantly higher inflation than the median advanced country since the early 1980s. We present a model in which a developing country may reduce inflationary ...expectations by pegging its exchange rate to the currency of an advanced country, at the expense of forgoing its ability to compensate for real exchange rate shocks. Different types of pegged exchange rate offer varying degrees of anti-inflation credibility and of exposure to shocks. Tests on a sample of 80 developing countries support the empirical predictions of the model.
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