Real exchange rates under alternative nominal exchange-rate systems
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Does higher openness cause more real exchange rate volatility?
2018, Journal of International EconomicsExchange rate regimes and real exchange rate volatility: Does inflation targeting help or hurt?
2016, Japan and the World EconomyCitation Excerpt :We also take into account self-selection concerns regarding policy adoption by following the methodology proposed by Lin (2010). The paper is also related to two other strands of literature, viz. impact of fixed versus flexible regimes on exchange rate volatility, including the so-called “Mussa puzzle” (Stockman, 1983 and Mussa, 1986) as well as the literature on REER decomposition into its two sub-components – external prices (deviation from purchasing power parity) and internal prices (relative price of tradables and nontradables) a la Engel (1999). The remainder of the paper is organized as follows.
Sources of asymmetric shocks: The exchange rate or other culprits?
2015, Economic SystemsCitation Excerpt :If the exchange rate does provide this partial shield, then it works as an “absorber” of asymmetric shocks. Empirical support for this view is provided, for example, by Stockman (1983). According to this view, a fixed exchange rate regime may seem inferior because it implies that the protection provided by the nominal exchange rate is lost.
Real exchange rate fluctuations and the relative importance of nontradables
2013, Journal of International Money and FinanceCitation Excerpt :Broadly, there are four sets of literature in this area. The first focuses on linking real exchange rate volatility to the exchange rate regime and, in particular, the rise in volatility as a country shifts from fixed to flexible regimes – so-called “Mussa puzzle” (Stockman, 1983; Mussa, 1986). The second set of literature employs Vector Auto Regression (VAR) methods and variance decomposition techniques to estimate the relative contributions of real and nominal shocks to real exchange rate fluctuations (for example, see Clarida and Gali, 1994; Enders and Lee, 1997; Lastrapes, 1992; Rogers, 1999).
Currency bid-ask spread dynamics and the Asian crisis: Evidence across currency regimes
2011, Journal of International Money and FinanceCitation Excerpt :The full sample and each of the emerging market subsets shows that tight regimes have significantly smaller spreads and loose regimes have significantly larger spreads. These results suggest that the exchange rate regime significantly influences spreads, beyond the influence on spreads via the regime–volatility relationship of Stockman (1983) and Baxter and Stockman (1989). To the extent that tightly-controlled regimes have fewer instances of unexpected government intervention, our finding of smaller spreads with tightly-controlled regimes is consistent with Naranjo and Nimalendran (2000).11
The classification and performance of alternative exchange-rate systems
2008, European Economic Review
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An earlier version of this paper circulated under the title, ‘Monetary Control and Terilization under Pegged Exchange Rates’. I wish to tank Robert Barro, John Bilson, Michael Darby, Jacob Frenkel, Jeremy Greenwood, Leonardo Leiderman, James Lothian. Robert Lucas, Rick Mishkin, Nasser Saidi, and Anna Schwartz for comments on earlier drafts.