Research Papers:

International Finance


Capital Flows & Liberalization

Domestic Saving and International Capital Movements in the Long Run and the Short Run
Feldstein, M. (1982)

The Order of Liberalization of the Current and Capital Accounts of the Balance of Payments   Acrobat Required
Edwards, S. (1983)

A Multilateral Agreement on Investment: Convincing the Sceptics
Drabek, Z. (1998)

Does Globalization Cause a Higher Concentration of International Trade and Investment flows?
Low, P., M. Olarreaga & J. Suarez (1998)

Whether and When to Liberalize Capital Account and Financial Services
Williamson, J. & Z. Drabek (1999)

Private Capital Flows, Living with Volatility, and the New Architecture   Acrobat Required
Corden, W.M. (1999)

Capital Flows To Developing Countries And The Reform Of The International Financial System   Acrobat Required
Akyuz, Y. & A. Cornford (1999)

Academic Views of Capital Flows: An Expanding Universe   Acrobat Required
Dooley, M.P. & C.E. Walsh (1999)

Problems and Challenges of International Capital Flows   Acrobat Required
Volcker, P.A. (1999)

How does openness to capital flows affect growth?   Acrobat Required
Rappaport, J. (2000)

A simple model of international capital flows, exchange rate risk, and portfolio choice   Acrobat Required!
Pecchenino, R.A. & P.S. Pollard (2000)

Capital Mobility for Developing Countries May Not Be So High   Acrobat Required
Willett, T.D., S.A. Young & M.W. Keil (2000)

Capital Mobility and Economic Performance: Are Emerging Economies Different?
Edwards, S. (2001)

The geography of capital flows: what we can learn from benchmark surveys of foreign equity holdings   Acrobat Required
Warnock, F.E. & M. Mason (2001)

Long-Term Capital Movements
Lane, P.R. & G.M. Milesi-Ferretti (2001)

Capital account liberalization and disinflation in the 1990s   Acrobat Required
Gruben, W.C. & D. McLeod (2001)

International Capital Flows: A Challenge for the 21st Century
Leite, S.P. (2001)

When Does Capital Account Liberalization Help More than It Hurts?
Arteta, C., C. Wyplosz & B. Eichengreen (2001)

The Information Content of International Portfolio Flows
Froot, K.A. & T. Ramadorai (2001)

Are International Deposits Tax-Driven?
Huizinga, H. & G. Nicodeme (2001)

Aging and International Capital Flows
Boersch-Supan, A., A. Ludwig & J. Winter (2001)

The Curse of Non-Investment Grade Countries
Rigobon, R. (2001)

Exchange Rates and Capital Flows
Brooks, R.J., H. Edison, M.S. Kumar & T.M. Slok (2001)

Puzzles Over International Taxation of Cross Border Flows of Capital Income
Whalley, J. (2001)

Capital Account Liberalisation: Empirical Evidence and Policy Issues I   Acrobat Required
Kohli, R. (2001)

Capital Account Liberalisation: Empirical Evidence and Policy Issues II   Acrobat Required
Kohli, R. (2001)

Global Capital Flows and Financing Constraints
Harrison, A.E., I. Love & M.S. McMillan (2002)

Capital flows? Balance of payments management
FitzGerald, V. (2002)

Financial Opening: Evidence and Policy Options
Aizenman, J. (2002)

Holding International Reserves in an Era of High Capital Mobility
Flood, R.P. & N.P. Marion (2002)

Growing Up With Capital Flows | Published   ScienceDirect Required
Mody, A. & A.P. Murshid (2002)

Determinants and Repercussions of the Composition of Capital Inflows
Carlson, M. & L.F. Hernandez (2002)

Financial centers and the geography of capital flows   Acrobat Required!
Warnock, F.E. & C. Cleaver (2002)
Börsch-Supan, A., A. Ludwig &mpa; J. Winter (2002)

Capital Account Liberalization and Economic Performance: Survey and Synthesis | Published   REVIEW PAPER
Edison, H.J., M.W. Klein, L. Ricci & T. Slok (2002)

Portfolio Investment: CPIS Database   Recommended!
IMF (2003)

Abstract: Under the auspices of the IMF, a Coordinated Portfolio Investment Survey (CPIS), involving the participation of 67 economies, was undertaken at end 2001. This followed the first CPIS, in which 29 economies participated, which was conducted for end-1997. The CPIS will now be conducted on an annual basis.

A Decomposition of Global Linkages in Financial Markets Over Time | Published   Ingenta Select Required
Forbes, K. & M.D. Chinn (2003)

Capital Flows to developing countries: does the emperor have clothes?   Acrobat Required!
Griffith-Jones, S. & J. Leape (2003)

When Rivers Flow Upstream: International Capital Movements in the Era of Globalization
Morrissey, M. & D. Baker (2003)

Catalyzing Capital Flows: Do IMF-Supported Programs Work as Commitment Devices?
Mody, A. & D. Saravia (2003)

What Do Capital Inflows Do? Dissecting the Transmission Mechanism for Thailand, 1980-96   Adobe Acrobat Required
Jansen, W.J. (2003)

What Drives Long-term Capital Flows? A Theoretical and Empirical Investigation | Published   Acrobat Required   ScienceDirect Required
Verdier, G. (2003/08)

The Developed World's Demographic Transition - The Roles of Capital Flows, Immigration, and Policy
Fehr, H., S. Jokisch & L. Kotlikoff (2003)

The Risk Tolerance of International Investors
Froot, K.A. & P.G. J. O'Connell (2003)

Why Doesn't Capital Flow from Rich Countries to Poor Countries? An Empirical Investigation   Acrobat Required
Alfaro, L., S. Kalemli-Ozcan & V. Volosovych (2003)

Open Capital Account: Concrete Wealth or Paper Wealth   Acrobat Required
Cai, J. & B. Gangnes (2003)

Serial Default and the "Paradox" of Rich to Poor Capital Flows | Published   Ingenta Select Required
Reinhart, C.M. (2004)

Empirical Perspectives on Long-Term External Debt
Lane, P.R. (2004)

The Composition of International Capital Flows: Risk Sharing Through Foreign Direct Investment   Acrobat Required
Albuquerque, A. (2004)

How can the IMF catalyse private capital flows? A model   Acrobat Required
Penalver, A. (2004)

On the Two Way Feedback Between Financial And Trade Openness | Published   ScienceDirect Required
Aizenman, J. & I. Noy (2004/06)

Capital Income Taxation and Economic Growth in Open Economies
Palomba, G. (2004)

Short-Term Capital Flows and Growth in Developed and Emerging Markets   Acrobat Required
Petroulas, P. (2004)

Sources for Financing Domestic Capital - Is Foreign Saving a Viable Option for Developing Countries? | Published   ScienceDirect Required
Aizenman, J., B. Pinto & A. Radziwill (2004/07)

Capital Income Taxation in the Globalized World
Razin, A. & E. Sadka (2004)

International Investment Patterns
Milesi-Ferretti, G.M. & P. Lane (2004)

When it Rains, it Pours: Procyclical Capital Flows and Macroeconomic Policies
Kaminsky, G.L., C.M. Reinhart & C.A. Vegh (2004)

Insurance Value of International Reserves: An Option Pricing Approach
Lee, J. (2004)

Credit Market Imperfections and Patterns of International Trade and Capital Flows   Acrobat Required
Matsuyama, K. (2004)

Keeping Capital Flowing: The Role of the IMF | Alternative
Bordo, M.D., A. Mody & N. Oomes (2004)

Can Higher Reserves Help Reduce Exchange Rate Volatility?
Hviding, K., M. Nowak & L.A. Ricci (2004)

External Adjustment
Obstfeld, M. (2004)

The Mussa Theorem: and other results on IMF induced moral hazard | Published   Recommended!
Jeanne, O.D. & J. Zettelmeyer (2004)

Abstract: Using a simple model of international lending, we show that as long as the IMF lends at an actuarially fair interest rate and debtor governments maximize the welfare of their taxpayers, any changes in policy effort, capital flows, or borrowing costs in response to IMF crisis lending are efficient. Thus, under these assumptions, the IMF cannot cause moral hazard, as argued by Michael Mussa (1999, 2004). It follows that examining the effects of IMF lending on capital flows or borrowing costs is not a useful strategy to test for IMF-induced moral hazard. Instead, empirical research on moral hazard should focus on the assumptions of the Mussa theorem.

World financial liberalization and its effects on capital flows   Adobe Acrobat Required
Santana, J.R. & F. Garcia (2004)

Technology Differences and Capital Flows   Adobe Acrobat Required
Claro, S. (2004)

Population Aging and International Capital Flows | Published   Blackwell Synergy Required
Domeij, D. & M. Floden (2004/06)

Do Tax Havens Flourish?
Hines, J.R. Jr. (2004)

FDI in Space: Spatial Autoregressive Relationships in Foreign Direct Investment
Blonigen, B.A., R.B. Davies, G.R. Waddell & H.T. Naughton (2004)

An Assignment Theory of Foreign Direct Investment
Nocke, V. & S. Yeaple (2004)

Why are Capital Flows so much more Volatile in Emerging than in Developed Countries?   Adobe Acrobat Required
Broner, F. & R. Rigobon (2004)

The Flow of Capital to Latin America, 1973–2000   ScienceDirect Required
Ramrattan, L., A.A. Gottesman & M. Szenberg (2005)

Foreign Direct Investment and the Domestic Capital Stock
Desai, M.C., C.F. Foley & J.R. Hines Jr. (2005)

Fundamentals, information, and international capital flows: A welfare analysis   ScienceDirect Required
Krebs, T. (2005)

Capital Account Liberalization, Institutional Quality and Economic Growth: Theory and Evidence
Klein, M.W. (2005)

The Effects of IMF and World Bank Lending on Long-Run Economic Growth: An Empirical Analysis   ScienceDirect Required
Butkiewicz, J.L. & H. Yanikkaya (2005)

International Financial Adjustment | Published   Recommended!
Gourinchas, P-O. & H. Rey (2005/07)

Abstract: We explore the implications of a country's external constraint for the dynamics of net foreign assets, returns, and exchange rates. Deteriorations in external accounts imply future trade surpluses (trade channel) or excess returns on the net foreign portfolio (valuation channel). Using a new data set on U.S. gross external positions, we find that stabilizing valuation effects contribute 27 percent of the cyclical external adjustment. Our approach has asset-pricing implications: external imbalances predict net foreign portfolio returns one quarter to two years ahead and net export growth at longer horizons. The exchange rate is forecastable in and out of sample at one quarter and beyond.

The determinants of cross-border equity flows   ScienceDirect Required
Portes, P. & H. Rey (2005)

The IMF in a World of Private Capital Markets | Published   ScienceDirect Required
Eichengreen, B., K. Kletzer & A. Mody (2005/06)

The Chinese Approach to Capital Inflows: Patterns and Possible Explanations
Prasad, E. & S-J. Wei (2005)

A Review of the Empirical Literature on FDI Determinants
Blonigen, B.A. (2005)

The IMF in a World of Private Capital Markets
Eichengreen, B.J., K. Kletzer & A. Mody (2005)

International Reserves: Precautionary versus Mercantilist Views, Theory and Evidence
Aizenman, J. & J. Lee (2005)

Does Competition for Capital Discipline Governments? Decentralization, Globalization, and Public Policy   Ingenta Select Required
Cai, H. & D. Treisman (2005)

A Meta-Analysis of the Effect of Common Currencies on International Trade   Blackwell Synergy Required
Rose, A.K. & T.D. Stanley (2005)

Curbing the Boom-Bust Cycle: Stabilizing Capital Flows to Emerging Markets   Recommended!
Williamson, J. (2005)

Abstract: For the past three decades, a boom-bust cycle in capital flows has repeatedly plunged into crisis countries that had been growing rapidly. Are there feasible policy actions to curb this cycle and thus permit both investors and emerging markets to tap the benefits of capital mobility without the costs of crises? Williamson concludes that a significant reduction in the wild swings in capital flows is feasible, even though complete stability is not. The boom-bust problem cannot be tackled just, or even mainly, from the supply side but will require actions on the part of both creditors and debtors, including forward-looking provisioning by banks, retention of capital controls in some cases, and introduction of new financial instruments. The action program developed in this study is intended to facilitate financial maturity in emerging markets similar to that which has already occurred in the industrial countries.

Neither a Borrower nor a Lender: Does China's Zero Net Foreign Asset Position Make Economic Sense? | Published   ScienceDirect Required   Acrobat Required
Dollar, D. & A. Kraay (2005)

A Global Perspective on External Positions | Alternative
Lane, P.R. & G.M. Milesi-Ferretti (2005)

The United States as a Debtor Nation   Recommended!
Cline, W.R. (2005)

Abstract: The United States has once again entered a period of large external imbalances. This time the current account deficit, at nearly 6 percent of GDP in 2004, is much larger than in the last episode, when the deficit peaked at about 3.5 percent of GDP in 1987. This deficit is no longer benign, as it arguably was in the late 1990s when it was financing high investment instead of high consumption and large government dissaving. In the absence of US fiscal adjustment and a further correction of the dollar, the current account deficit is headed to $1.2 trillion by 2010 (7½ percent of GDP) and net US foreign liabilities to about $8 trillion (50 percent of GDP). The rising imbalance will increasingly put the US economy--and hence the world economy and especially developing countries--at risk. The dollar needs to decline by as much as another 20 percent, and the fiscal deficit needs to be eliminated, to bring the current account deficit down to a sustainable 3 percent of GDP. Asian currencies, especially the Chinese renminbi, will need to rise sharply, and central banks should stop intervening to prevent this rise.

Bilateral FDI Flows: Threshold Barriers and Productivity Shocks
Razin, A., E. Sadka & H. Tong (2005)

FDI Flows to Asia: Did the Dragon Crowd Out the Tigers?
Mercereau, B. (2005)

Capital Flows in a Globalized World: The Role of Policies and Institutions
Alfaro, L., S. Kalemli-Ozcan & V. Volosovych (2005)

International Capital Flows, Returns and World Financial Integration
Evans, M.D.D. & V. Hnatkovska (2005)

Controlled Capital Account Liberalization: A Proposal
Prasad, E. & R. Rajan (2005)

An Information-Based Trade Off between Foreign Direct Investment and Foreign Portfolio Investment | Published   ScienceDirect Required
Goldstein, I. & A. Razin (2005/06)

Capital mobility among advanced countries   ScienceDirect Required
Kant, C. (2005)

Is Financial Globalization Beneficial?
Mishkin, F. (2005)

Why Doesn't Capital Flow from Rich to Poor Countries? An Empirical Investigation
Alfaro, L., S. Kalemli-Ozcan & V. Volosovych (2005)

The Social Cost of Foreign Exchange Reserves
Rodrik, D. (2006)

The External Wealth of Nations Mark II: Revised and Extended Estimates of Foreign Assets and Liabilities, 1970-2004 | Published   ScienceDirect Required
Lane, P.R. & G.M. Milesi-Ferretti (2006/07)

Determinants of Capital Flows: A Cross-Country Analysis   Acrobat Required
Ralhan, M. (2006)

The Accumulation of Foreign Reserves   Acrobat Required
Pineau, G., E. Dorrucci, F. Comelli & A. Lagerblom (2006)

Private capital flows, capital controls, and default risk   ScienceDirect Required
Wight, M.L.J. (2006)

A Portfolio Theory of International Capital Flows   Acrobat Required
Devereux, M.B. & M. Saito (2006)

The Case for an International Reserve Diversification Standard   Acrobat Required
Truman, E.M. & A. Wong (2006)

Institutions, capital flows and financial integration   ScienceDirect Required
Lothian, J.R. (2006)

Foreign reserves management subject to a policy objective   Acrobat Required
Coche, J., M. Koivu, K. Nyholm & V. Poikonen (2006)

Capital Flows and Monetary Policy   Acrobat Required
Pineda, J.G. (2006)

The IMF and the Liberalization of Capital Flows   Acrobat Required
Joyce, J.P. & I. Noy (2006)

Catalysing Private Capital Flows: Do IMF Programmes Work as Commitment Devices?   Blackwell Synergy Required
Mody, A. & D. Saravia (2006)

U.S. Dollar Risk Premiums and Capital Flows
Balakrishnan, R. & V. Tulin (2006)

When is FDI a Capital Flow?   Acrobat Required
Marin, D. & M. Schnitzer (2006)

Real Exchange Rate and International Reserves in the Era of Growing Financial and Trade Integration
Aizenman, J. & D. Riera-Crichton (2006)

A Solution to Two Paradoxes of International Capital Flow
Ju, J. & S-J. Wei (2006)

Institutional Efficiency, Monitoring Costs and the Investment Share of FDI   Blackwell Synergy Required
Aizenman, J. & M.M. Spiegel (2006)

What matters for financial development? Capital controls, institutions, and interactions   ScienceDirect Required
Chinn, M.D. & H. Ito (2006)

Economic Policy, Institutions, and Capital Flows: Portfolio and Direct Investment Flows in Developing Countries   Blackwell Synergy Required
Ahlquist, J.S. (2006)

The Home Bias and Capital Income Flows between Countries and Regions
Artis, M.J. & M. Hoffmann (2006)

International Capital Flows and U.S. Interest Rates
Warnock, F.E. & V.C. Warnock (2006)

The Optimal Level of International Reserves for Emerging Market Countries: Formulas and Applications
Jeanne, o. & R. Ranciere (2006)

Bond Markets As Conduits for Capital Flows: How Does Asia Compare?
Eichengreen, B.J. & P. Luengnaruemitchai (2006)

Capital Account Liberalization: Theory, Evidence, and Speculation | Published
Henry, P.B. (2006/07)

Unemployment dynamics with international capital mobility   ScienceDirect Required
Azariadis, C. & C.A. Pissarides (2006)

International reserves management and capital mobility in a volatile world: Policy considerations and a case study of Korea   ScienceDirect Required
Aizenman, J., Y. Lee & Y. Rhee (2007)

Central bank intervention and exchange rate dynamics: A rationale for the regime-switching process of exchange rates   ScienceDirect Required
Lee, H-Y. & W-Y. Chang (2007)

Multinational Firms, FDI Flows and Imperfect Capital Markets
Antras, P., M.A. Desai & C.F. Foley (2007)

Trade Costs and Foreign Direct Investment
Neary, J.P. (2007)

The determinants of capital inflows: Does opacity of recipient country explain the flows?   ScienceDirect Required
Hooper, V. & S-J. Kim (2007)

Longitude matters: Time zones and the location of foreign direct investment   ScienceDirect Required
Stein, E. & C. Daude (2007)

International Finance and Income Convergence: Europe is Different
Abiad, A., D. Leigh & A. Mody (2007)

The endogeneity of the exchange rate as a determinant of FDI: A model of entry and multinational firms   ScienceDirect Required
Russ, K.N. (2007)

Liquidity Risk Aversion, Debt Maturity, and Current Account Surpluses: A Theory and Evidence from East Asia
Fukuda, S-I. & Y. Kon (2007)

International capital flows   Acrobat Required
Tille, C. & E. van Wincoop (2007)

Capital flows and capital goods   ScienceDirect Required
Alfaro, L. & E. Hammel (2007)

The Stability of Large External Imbalances: The Role of Returns Differentials
Curcuru, S.E., T. Dvorak & F.E. Warnock (2007)

Productivity and Taxes as Drivers of FDI
Razin, A. & E. Sadka (2007)

Explaining the global pattern of current account imbalances   ScienceDirect Required
Gruber, J.W. & S.B. Kamin (2007)

Current account balances, financial development and institutions: Assaying the world “saving glut”   ScienceDirect Required
Chinn, M.D. & H. Ito (2007)

Equipping Immigrants: Migration Flows and Capital Movements
Lange, F. & D. Gollin (2007)

International Financial Integration and Entrepreneurial Firm Activity
Alfaro, L. & A. Charlton (2007)

Welfare Implications of Capital Account Liberalization   Acrobat Required
Faia, E. (2007)

The Harberger–Laursen–Metzler effect under capital market imperfections   ScienceDirect Required
Huang, K.X.D. & Q. Meng (2007)

Large Hoarding of International Reserves and the Emerging Global Economic Architecture
Aizenman, J. (2007)

Drift control of international reserves   ScienceDirect Required
Bar-Ilan, A., N.P. Marion & D. Perry (2007)

Revisiting Price-based Controls on Capital Inflows in a “Sophisticated” Emerging Market   ScienceDirect Required
David, A.C. (2007)

Measurement and Inference in International Reserve Diversification   Acrobat Required
Wong, A. (2007)

Returns on FDI: Does the U.S. Really Do Better?
Bosworth, B., S.M. Collins & G. Chodorow-Reich (2007)

The effect of the euro on foreign direct investment   ScienceDirect Required
Petroulas, P. (2007)

International investment positions and exchange rate dynamics: a dynamic panel analysis   Acrobat Required
Binder, M. & C.J. Offermanns (2007)

International reserves and monetary policy   ScienceDirect Required
Bar-Ilan, A. & D. Lederman (2007)

Reserve accumulation: objective or by-product?   Acrobat Required
de Beaufort Wijnholds, J.O. & L. Søndergaard (2007)

Current Account Adjustment and Capital Flows   Blackwell Synergy Required
Debelle, G. & G. Galati (2007)

Capital Flows to Developing Countries: The Allocation Puzzle
Gourinchas, P-O. & O. Olivier (2007)

Foreign Capital and Economic Growth
Prasad, E.S., R.G. Rajan & A. Subramanian (2007)

Do Reserve Portfolios Respond to Exchange Rate Changes Using a Portfolio Rebalancing Strategy? An Econometric Study Using COFER Data
Lim, E-G. (2007)

Terrorism and the world economy   ScienceDirect Required
Abadie, A. & J. Gardeazabal (2008)

Globalization and the Sustainability of Large Current Account Imbalances: Size Matters
Aizenman, J. & Y. Sun (2008)

International Reserves-Too Much of a Zipf's Thing
Sumlinski, M. (2008)

The Landscape of Capital Flows to Low-Income Countries
Dorsey, T.W., H. Tadesse, S. Singh & Z. Brixiova (2008)

Taxes and the global allocation of capital   ScienceDirect Required
Backus, D., E. Henriksen & K. Storesletten (2008)

Capital Inflows and Reserve Accumulation: The Recent Evidence
Reinhart, C.M. & V.R. Reinhart (2008)

Capital Account Liberalization, Real Wages, and Productivity
Henry, P.B. & D. Sasson (2008)

International capital mobility: What do national saving–investment dynamics tell us?   ScienceDirect Required
Pelgrin, F. and S. Schich (2008)

International capital mobility: Evidence from panel cointegration tests   ScienceDirect Required
Adedeji, O. & J. Thornton (2008)

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Currency Competition

Toward a Theory of International Currency   Recommended!   JSTOR Required
Matsuyama, K., N. Kiyotaki & A. Matsui (1993)

Abstract: Our goal is to provide a theoretical framework in which both positive and negative aspects of international currency can be addressed in a systematic way. To this end, we use the framework of random matching games and develop a two country model of the world economy, in which two national fiat currencies compete and may be circulated as media of exchange. There are multiple equilibrium which differ in the areas of circulation of the two currencies. In one equilibrium, the two national currencies are circulated only locally. In another, one of the national currencies is circulated as an international currency. There is also an equilibrium in which both currencies are accepted internationally. We also find an equilibrium in which the two currencies are directly exchanged. The existence conditions of these equilibria are characterized, using the relative country size and the degree of economic integration as the key parameters. In order to generate sharper predictions in he presence of multiple equilibria, we discuss an evolutionary approach to equilibrium selection, which is used to explain the evolution of the international currency as the two economies become more integrated. Some welfare implications are also discussed. For example, a country can improve its national welfare by letting its own currency circulated internationally, provided the domestic circulation is controlled for. When the total supply is fixed, however, a resulting currency shortage may reduce the national welfare.

Currency Exchange in a Random Search Model   Recommended!   JSTOR Required
Zhou, R. (1997)

Abstract: This paper investigates foreign exchange trading, a phenomenon that typically accompanies international trade. A search-theoretic general equilibrium approach is adopted to study a two-country, two-currency model. For some parameter values of the model, there exist some pure-strategy equilibria in which commodity-currency trade is conducted primarily through local currency and in which there is active currency-currency exchange. The coexistence of valued foreign currency and its local non-acceptability conforms largely with the country-specific cash-in-advance constraint that is often assumed exogenously in international finance literature.

Transactions costs and vehicle currencies   Recommended!   ScienceDirect Required
Black, S.W. (1991)

Abstract: Using a simple model of transactions costs in the interbank foreign exchange market and a model of vehicle currency use, the interaction between transactions costs and vehicle currency use is explored. The impact of volume on bid–ask spreads is estimated from cross-section time series data on seven currencies. Data on transactions costs and the currency denomination of trade and capital transactions are used to estimate changes in the attractiveness of using the US dollar as a vehicle between 1980 and 1987. The data suggest a modest reduction in the attractiveness and use of the dollar as a vehicle.

International Trade and Currency Exchange   Recommended!   JSTOR Required
Rey, H. (2002)

Abstract: On the international scene, away from national legal rules, the use of different currencies is largely due to the operation of the "Invisible Hand". The paper develops a three-country model of the world economy. This links real trade patterns with currency exchange structures in a general equilibrium framework which includes transaction costs on foreign exchange markets. In the presence of strategic complementarities, there are multiple equilibrium structures of currency exchange for a given underlying real trade pattern. The existence conditions of these different equilibria are characterized, using the trade links between countries as the key parameters. Finally, repercussions on world output of the choice of a currency exchange structure are analysed.

An Information Approach to International Currencies
Lyons, R.K. & M.J. Moore (2005)

Sterling's Past, Dollar's Future: Historical Perspective on Reserve Currency Competition
Eichengreen, B. (2005)

State "Currencies" and the Transition to the U.S. Dollar: Clarifying Some Confusions   Ingenta Select Required
Michener, R.W. & R.E. Wright (2005)

Will the Euro Eventually Surpass the Dollar as Leading International Reserve Currency
Chinn, M. & J. Frankel (2005)

A Theory of International Currency and Seigniorage Competition   Acrobat Required
Li, Y. & A. Matsui (2005)

The Ties that Divide: A Network Analysis of the International Monetary System
Flandreau, M. & C. Jobst (2005)

The Empirics of International Currencies: Historical Evidence   Acrobat Required
Flandreau, M. & C. Jobst (2006)

The Euro's Challenge to the Dollar: Different Views from Economists and Evidence from COFER (Currency Composition of Foreign Exchange Reserves) and Other Data
Lim, E-G. (2006)

Optimal Currency Shares in International Reserves: The Impact of the Euro and the Prospects for the Dollar
Papaioannou, E., R. Portes & G. Siourounis (2006)

The International Role of the Dollar and Trade Balance Adjustment
Goldberg, L.S. & C. Tille (2006)

Money and capital as competing media of exchange   Acrobat Required
Lagos, R. & G. Rocheteau (2006)

Inflation and dollarization in a dual-currency search-theoretic model   ScienceDirect Required
Chang, S.S. (2006)

On the Welfare Benefits of an International Currency
Kannan, P. (2007)

Float on a note   ScienceDirect Required
Wallace, N. & T. Zhu (2007)

The euro as a reserve currency: a challenge to the pre-eminence of the US dollar?
Galati, G. & P.D. Wooldridge (2007)

Currency Preferences in a Tri-Polar Model of Foreign Exchange   Acrobat Required
Melecky, M. (2007)

Asymmetric government transaction policies and currencies substitutability   ScienceDirect Required
Marchesiani, A. & P. Senesi (2007)

The growing role of the euro in emerging market finance
Masson, P.R. (2007)

International Money and Finance   Acrobat Required
Hallwood, P. & R. MacDonald (2008)

Macroeconomic Interdependence and the International Role of the Dollar
Goldberg, L.S. & C. Tille (2008)

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Exchange Rate Determination (Nominal)

Expectations and Exchange Rate Dynamics   Recommended!   JSTOR Required
Dornbusch, R. (1976)

Abstract: The paper develops a theory of exchange rate movements under perfect capital mobility, a slow adjustment of goods markets relative to asset markets, and consistent expectations. The perfect foresight path is derived and it is shown that along that path a monetary expansion causes the exchange rate to depreciate. An initial overshooting of exchange rates causes is shown to derive from the differential adjustment speed of markets. The magnitude and persistence of the overshooting is developed in terms of the structural parameters of the model. To the extent that output responds to a monetary expansion in the short run, this acts as a dampening effect on exchange rate depreciation and may, in fact, lead to an increase in interest rates.

A Theory of Exchange Rate Determination   Recommended!   JSTOR Required
Stockman, A.C. (1980)

Abstract: This paper develops an equilibrium model of the determination of exchange rates and prices of goods. Changes in relative prices of goods, due to supply or demand shifts, induce changes in exchange rates and deviations from purchasing power parity. These changes may create a correlation between the exchange rate and the terms of trade, but this correlation cannot be exploited by the government to affect the terms of trade by foreign exchange market operations.

Empirical Exchange Rate Models of the Seventies: Do They Fit Out of Sample?   Recommended!
Meese, R. & K. Rogoff (1983)

Abstract: This study compares the out-of-sample forecasting accuracy of various structural and time series exchange rate models. We find that a random walk model performs as well as any estimated model at one to twelve month horizons for dollar/pound, dollar/mark, dollar/yen and trade-weighted dollar exchange rates. The candidate structural models include the flexible price (Frenkel-Bilson) and sticky-price (Dornbusch-Frankel) monetary models, and a sticky-price model which incorporates the current account (Hooper-Morton). The structural models perform poorly despite the fact that we base their forecasts on actual realized values of future explanatory variables.

Rational Expectations and Exchange Rate Dynamics   Recommended!   JSTOR Required
Wickens, M.R. (1984)

Abstract: Dornbusch's overshooting model of the exchange rate has proved a very influential alternative to the monetary model. The original Dornbusch model was specified in continuous time and assumed perfect foresight. It also imposed the restriction of a sticky price level which does not respond instantaneously to new information. While convenient for analytic purposes, this particular model is less suitable for empirical analysis in which the data are aggregated over time and expectations are not formed perfectly. This paper presents a discrete time, rational expectations version of the Dornbusch model in which the price level is permitted to respond immediately, but not necessarily fully, to new information. The resulting dynamic behaviour of the exchange rate is analysed and interpreted. The conditions under which exchange rate overshooting occurs are derived and the effect of pre-announced policy changes are studied. Although the main purpose of the paper is expositional, an interesting feature of the results is that price stickyness is shown to be neither a necessary nor a sufficient condition for a change in monetary policy to bring about exchange rate overshooting.

The Equilibrium Approach to Exchange Rates   Recommended!   Acrobat Required
Stockman, A.C. (1987)

Abstract: The disequilibrium theory of exchange rates has come under increasing criticism in recent years. It conflicts with available evidence and an alternative equilibrium theory based on simple economic principles has been developed. The new theory has completely different implications and policy prescriptions from the earlier theory, which underlies most current public policy discussions. This article summarizes the basic elements of the equilibrium approach to exchange rate behavior and the evidence that conflicts with the older disequilibrium theory. It argues that the equilibrium approach to exchange rates is in better accord with this evidence. It concludes with a discussion of the implications of the equilibrium approach to exchange rates for economic policies.

Risk and Exchange Rates   Recommended!   Acrobat Required
Obstfeld, M. & K. Rogoff (2000)

Abstract: The model we propose in this paper extends the “new open-economy macroeconomics” framework of Obstfeld and Rogoff (1995, 1996), Corsetti and Pesenti (1998), and others to an explicitly stochastic environment. We analyze a sticky-price monetary model in which risk has an impact not only on asset prices and short-term interest rates, but also on the price-setting decisions of individual producers, and thus on expected output and interna-tional trade flows.

Price Discovery in Multiple-Dealer Markets: The Case of the Interbank Foreign Exchange Market
Williams, K.L. (2000)

FX Trading & Exchange Rate Dynamics
Evans, M.D.D. (2001)

The Application of Artificial Neural Networks to Exchange Rate Forecasting: The Role of Market Microstructure Variables
Gradojevic, N. & Y. Jing (2001)

Implicit Band within the Announced Exchange Rate Band   Acrobat Required
Koren, M. (2001)

Chaos and the Exchange Rate   Acrobat Required
Federici, D. & G. Gandolfo (2001)

High- and Low-Frequency Exchange Rate Volatility Dynamics: Range-Based Estimation of Stochastic Volatility Models
Alizadeh, S., M.W. Brandt & F.X. Diebold (2001)

Easy Money through the Back Door: The Markets vs. the ECB | Alternative   Acrobat Required
Bibow, J. (2001)

The Adjustment of Prices and the Adjustment of the Exchange Rate   Acrobat Required
Engel, C. & J. Morley (2001)

Currency Substitution and the Demand for Money: Some Evidence for Canada   Acrobat Required
Bordo, M.D. & E.U. Choudhri (2001)

Technical Analysis in Foreign Exchange Markets: Linear Versus Nonlinear Trading Rules   Acrobat Required
Fernández-Rodríguez, F., S. Sosvilla-Rivero and J. Andrada-Félix (2001)

On the Variation of Hedging Decisions in Daily Currency Risk Management   Acrobat Required
Bos, C.S., R.J. Mahieu & H.K. van Dijk (2001)

Daily Exchange Rate Behaviour and Hedging of Currency Risk   Acrobat Required
Bos, C.S., R.J. Mahieu & H.K. van Dijk (2001)

Learning Dynamics in an Artificial Currency Market   Acrobat Required
Georges, C. (2001)

Abstract: This paper considers the behavior of the exchange rate in a very simple artificial currency market with two currencies and artificial agents who evolve their forecast rules over time via a genetic algorithm. I consider two simple forecast rules, one linear and the other non-linear. Under the first rule, learning tends to be rapid and complete. Under the second, learning can generate persistent exchange rate dynamics.

The Multi-Fractal Model of Asset Returns: Simple Moment and GMM Estimation   Acrobat Required
Lux, T. (2001)

Modelling exchange rates: smooth transitions, neural networks, and linear models   Acrobat Required
Medeiros, M.C., A. Veiga & C.E. Pedreira (2001)

Rational Speculation and Exchange Rates | Published | Comment   ScienceDirect Required
Duarte, M. & A.C. Stockman (2001)

Current Accounts and Exchange Rates: A New Look at the Evidence
Leonard, G. & A.C. Stockman (2001)

Portfolio Balance, Price Impact, and Secret Intervention
Evans, M.D.D. & R.K. Lyons (2001)

Why Has the Euro Been Falling? An Investigation into the Determinants of the Exchange Rate   Recommended!
Sinn, H.W. & F. Westermann (2001)

Abstract: This paper reconsiders the determinants of the exchange rate by studying the historical episode after the fall of the Iron Curtain. Testing a modified portfolio balance model, we attribute the strength of the deutschmark in the early nineties and the puzzling decline of the euro during its virtual existence to changes in the demand for deutschmarks in eastern Europe and to variations in the demand for black money balances in Europe as a whole. We reject the view that the strength of the dollar and the weakness of the euro reflect the prosperity of the US and the weakness of the European economy on both theoretical and empirical grounds.

Heterogeneous Expectations, Currency Options and the Euro/Dollar Exchange Rate   Acrobat Required
Rzepkowski, B. (2001)

Currency orders and exchange-rate dynamics: explaining the success of technical analysis   Acrobat Required
Osler, C.L. (2001)

Tracking the euro
Koen, V., L. Boone, A. de Serres & N. Fuchs (2001)

Exact Non-Parametric Tests for a Random Walk with Unknown Drift under Conditional Heteroscedasticity
Luger, R. (2001)

Modelling Time-Varying Exchange Rate Dependence Using the Conditional Copula | Published   Acrobat Required   Blackwell Synergy Required
Patton, A.J. (2001/06)

FX trading and Exchange Rate Dynamics   Acrobat Required
Evans, M. (2001)

To What Extent Does Productivity Drive the Dollar?   Recommended!
Tille, C., N. Stoffels & O. Gorbachev (2001)

Abstract: The continuing strength of the dollar has fueled interest in the relationship between productivity and exchange rates. An analysis of the link between the dollar’s movements and productivity developments in the United States, Japan, and the euro area suggests that productivity can account for much of the change in the external value of the dollar over the past three decades.

Simulated Likelihood Estimation of Diffusions with an Application to Exchange Rate Dynamics in Incomplete Markets
Brandt, M.W. & P. Santa-Clara (2001)

Abstract: We present an econometric method for estimating the parameters of a diffusion model from discretely sampled data. The estimator is transparent, adaptive, and inherits the asymptotic properties of the generally unattainable maximum likelihood estimator. We use this method to estimate a new continuous-time model of the Joint dynamics of interest rates in two countries and the exchange rate between the two currencies. The model allows financial markets to be incomplete and specifies the degree of incompleteness as a stochastic process. Our empirical results offer several new insights into the dynamics of exchange rates.

Structural Error Correction Models: Instrumental Variables Methods and Application to an Exchange Rate Model   Acrobat Required
Kim, J., M. Ogaki & M.S. Yang (2001)

The Adjustment of Prices and the Adjustment of the Exchange Rate
Engel, C. & J.C. Morley (2001)

Why Has the Euro Been So Weak?
Meredith, G.M. (2001)

The Out-of-Sample Success of Term Structure Models as Exchange Rate Predictors: A Step Beyond
Clarida, R., L. Sarno, M. Taylor & G. Valente (2001)

Can Markov switching models predict excess foreign exchange returns?   Acrobat Required!
Dueker, M. & C.J. Neely (2001)

UIP for Short Investments in Long-Term Bonds   Acrobat Required
Alexius, A. (2001)

Daily exchange rate behaviour and hedging of currency risk   Acrobat Required
Bos, C.S., R.J. Mahieu & H.K. Van Dijk (2001)

Neural networks as econometric tool   Acrobat Required
Kaashoek, J.F. & H.K. Van Dijk (2001)

Exchange Rate Forecasting: The Errors We've Really Made | Published   ScienceDirect Required
Faust, J., J.H. Rogers & J. Wright (2001/2003)

Why is it so difficult to beat the random walk forecast of exchange rates?   Acrobat Required!
Kilian, L. & M.P. Taylor (2001)

Heterogeneous Beliefs and Instability   Recommended!   Acrobat Required!
Lasselle, L., S. Svizzero & C. Tisdell (2001)

Abstract: While Rational Expectations have dominated the paradigm of expectations formation, they have been more recently challenged on the empirical ground such as, for instance, in the dynamics of the exchange rate. This challenge has led to the introduction of heterogeneous expectations in economic modeling. More specifically, the forecasts of the market participants have been drawn from competing views. Two behaviours are usually considered: agents are either fundamentalist or chartist. Moreover, the possibility of switching from one behaviour to the other one is also assumed. In a simple cobweb model, we study the dynamics associated with different endogenous switching process based on the path of prices. We provide an example with an asymmetric endogenous switching process built on the dynamics of past prices. This example confirms the widespread belief that fundamentalist market behaviour as compared with that of chartist tends to promote market stability.

Predicting exchange rate volatility genetic programming vs. GARCH and RiskMetrics   Acrobat Required!
Neely, C.J. & P.A. Weller (2001)

The Forward Premium Puzzle Revisited
Meredith, G.M. & Y. Ma (2002)

Commodity Currencies and Empirical Exchange Rate Puzzles
Chen, Y.C. & K. Rogoff (2002)

Productivity and the Euro-Dollar Exchange Rate Puzzle
Alquist, R. & M.D. Chinn (2002)

Exchange Rate Pass-Through, Exchange Rate Volatility, and Exchange Rate Disconnect   Recommended!
Devereux, M.B. & C. Engel (2002)

Abstract: This paper explores the hypothesis that high volatility of real and nominal exchange rates may be due to the fact that local currency pricing eliminates the pass-through from changes in exchange rates to consumer prices. Exchange rates may be highly volatile because in a sense they have little effect on macroeconomic variables. The paper shows the ingredients necessary to construct such an explanation for exchange rate volatility. In addition to the presence of local currency pricing, we need a) incomplete international financial markets, b) a structure of international pricing and product distribution such that wealth effects of exchange rate changes are minimized, and c) stochastic deviations from uncovered interest rate parity. Together, it is shown that these elements can produce exchange rate volatility that is much higher than shocks to economic fundamentals, and `disconnected' from the rest of the economy in the sense that the volatility of all other macroeconomic aggregates are of the same order as that of fundamentals.

Dornbusch's Overshooting Model After Twenty-Five Years   Recommended!
Rogoff, K. (2002)

Abstract: This Mundell Fleming lecture at the International Monetary Fund's annual research conference marks the 25th anniversary of Rudiger Dornbusch's masterpiece, "Expectations and Exchange Rate Dynamics", a seminal contribution to both policy and research in the field of international finance. This essay provides a simple overview of the model as well as some empirics, not only on exchange rates but on measures of the paper's influence. Last, but not least, I offer some personal reflections on how Dornbusch conveyed the ideas in his "overshooting model" to inspire a generation of students.

Non-Linear Forecasting Methods: Some Applications to the Analysis of Financial Series   Acrobat Required!
Bajo-Rubio, O., S. Sosvilla-Rivero & F. Fernández-Rodríguez (2002)

Foreign exchange: macro puzzles, micro tools   Acrobat Required!   REVIEW PAPER
Lyons, R.K. (2002)

Exchange Rate Modelling: Where Do We Stand? | Published   Recommended!   REVIEW PAPERS
CESifo Summer Institute (2002/2005)

Abstract: Proceedings of a CESIfo Summer Institute Workshop held at the Venice International University, San Servolo, 13-14 July, 2002.

Currency Returns, Institutional Investor Flows, and Exchange Rate Fundamentals
Froot, K.A. & T. Ramadorai (2002)

The Cross Sectional Dependence Puzzle   Adobe Acrobat Required!
Cerrato, M. (2002)

The Euro-Dollar exchange rate: Is it fundamental?   Adobe Acrobat Required
Camarero, M., J. Ordóñez & C. Tamarit (2002)

Return-volatility linkages in the international equity and currency markets   Acrobat Required
Francis, B.B., I. Hasan & D.M. Hunter (2002)

Exchange Rates and Adjustment: Perspectives from the New Open Economy Macroeconomics
Obstfeld, M. (2002)

Empirical Exchange Rate Models of the Nineties: Are Any Fit to Survive? | Published   Recommended!   ScienceDirect Required
Cheung, Y.W., M.D. Chinn & A.G. Pascual (2002/2005)

Abstract: Previous assessments of nominal exchange rate determination have focused upon a narrow set of models typically of the 1970's vintage. The canonical papers in this literature are by Meese and Rogoff (1983, 1988), who examined monetary and portfolio balance models. Succeeding works by Mark (1995) and Chinn and Meese (1995) focused on similar models. In this paper we re-assess exchange rate prediction using a wider set of models that have been proposed in the last decade: interest rate parity, productivity based models, and behavioral equilibrium exchange rate' models. The performance of these models is compared against a benchmark model the Dornbusch-Frankel sticky price monetary model. The models are estimated in error correction and first-difference specifications. Rather than estimating the cointegrating vector over the entire sample and treating it as part of the ex ante information set as is commonly done in the literature, we recursively update the cointegrating vector, thereby generating true ex ante forecasts. We examine model performance at various forecast horizons (1 quarter, 4 quarters, 20 quarters) using differing metrics (mean squared error, direction of change), as well as the consistency' test of Cheung and Chinn (1998). No model consistently outperforms a random walk, by a mean squared error measure; however, along a direction-of-change dimension, certain structural models do outperform a random walk with statistical significance. Moreover, one finds that these forecasts are cointegrated with the actual values of exchange rates, although in a large number of cases, the elasticity of the forecasts with respect to the actual values is different from unity. Overall, model/specification/currency combinations that work well in one period will not necessarily work well in another period.

Classroom Guide to the Equilibrium Exchange Rate Model   Acrobat Required
Da Silva, S. (2002)

The Dornbusch Model with Chaos and Foreign Exchange Intervention   Acrobat Required
Da Silva, S. (2002)

Understanding Bilateral Exchange Rate Volatility   Adobe Acrobat Required
Devereux, M.B. and P.R. Lane (2002)

Keynes, Cocoa, and Copper: In Search of Commodity Currencies
Cashin, P.A., L. Cespedes & R. Sahay (2003)

Explaining the Exchange Rate Pass-Through in Different Prices
Choudhri, E.U., H. Faruqee & D. Hakura (2003)

How is Macro News Transmitted to Exchange Rates? | Published   ScienceDirect Required
Evans, M.D.D. & R.K. Lyons (2003/08)

Forward Discount Bias, Nalebuff's Envelope Puzzle, and the Siegel Paradox in Foreign Exchange
Edlin, A.S. (2003)

A Fundamental Theory of Exchange Rates and Direct Currency Trades | Published   ScienceDirect Required   Adobe Acrobat Required
Head, A. & S. Shi (2003)

Testing the Informational Efficiency of OTC Options on Emerging Market Currencies
Chan-Lau, J. & A. Morales (2003)

Can Information Heterogeneity Explain the Exchange Rate Determination Puzzle? | Published   Ingenta Select Required
van Wincoop, E. & P. Bacchetta (2003/06)

Medium-Term Exchange Rate Forecasting: What Can We Expect?
Meredith, G. (2003)

Uncovered interest parity: it works, but not for long | Published   ScienceDirect Required
Chaboud, A.P. & J.H. Wright (2003/2005)

Exchange rate determination in a model of pricing-to-market and nontradeables   Adobe Acrobat Required
Hairault, J.O. & T. Sopraseuth (2003)

Is Grassman's Law Still There? The Empirical Range of Pass-Through in US, German and Japanese Macrodata   Acrobat Required
Mihailov, A. (2003)

Overshooting and the exchange rate disconnect puzzle: a reappraisal | Published   ScienceDirect Required   Adobe Acrobat Required
Hairault, J.O., L. Patureau, Lise & T. Sopraseuth (2003/04)

Chartists and Fundamentalists in the Currency Market and the Volatility of Exchange Rates   Acrobat Required
Bask, M. (2003)

Technical Analysis in Foreign Exchange - The Workhorse Gains Further Ground   Acrobat Required
Gehrig, T. & L. Menkhoff (2003)

More Evidence on the Dollar Risk Premium in the Foreign Exchange Market
Bams, D., K. Walkowiak &l; C. Wolff (2003)

Why is it so difficult to beat the random walk forecast of exchange rates?   ScienceDirect Required
Kilian, L. & M.P. Taylor (2003)

Commodity currencies   ScienceDirect Required
Chen, Y.C. and K. Rogoff (2003)

Nonlinear Exchange Rate Models: A Selective Overview   REVIEW PAPER
Sarno, L. (2003)

Trade Liberalization and Real Exchange Rate Movement
Li, X. (2003)

Does the Purchasing Power Parity Hold in Emerging Markets? Evidence from Black Market Exchange Rates   Adobe Acrobat Required
Cerrato, M. & N. Sarantis (2003)

Noise Traders and the Volatility of Exchange Rates   Adobe Acrobat Required
Bauer, C. & B. Herz (2003)

Asymmetric Adjustment and Nonlinear Dynamics in Real Exchange Rates
Leon, H.L. & S. Najarian (2003)

Tough Policies, Incredible Policies?
Velasco, A. & A. Neut (2003)

Official Interventions and Occasional Violations of Uncovered Interest Party
Mark, N. & Y-K. Moh (2003)

Exchange rate dynamics, central bank interventions and chaos control methods | Published   Adobe Acrobat Required   ScienceDirect Required
Westerhoff, F. & C. Wieland (2003)

Investment Prices and Exchange Rates: Some Basic Facts | Alternative   Recommended!   Acrobat Required
Burstein, A., J. Neves & S. Rebelo (2003)

Abstract: This paper documents four basic facts about investment goods and investment prices. First, investment has a very signiÞcant nontradable component in the form of construction services. Second, distributions services (wholesaling, retailing and transportation) are much less importance for investment than for consumption. Third, the import content of investment is much larger than that of consumption. Finally, in the aftermath of three large devaluations the rate of exchange rate pass-through is, not surprisingly, highest for imported equipment and lowest for construction services.

Exchange Rate Puzzles and Distorted Beliefs | Published   Acrobat Required   ScienceDirect Required
Gourinchas, P.O. & A. Tornell (2003)

Time-Varying Thresholds: An Application to Purchasing Power Parity
Leon, H.L. & S. Najarian (2003)

Can We Beat the Random Walk Forecasts of Out-of-Sample Exchange Rates? A Structural Approach   Acrobat Required
Karame, F., L. Patureau & T. Sopraseuth (2003)

The Big Mac Standard: A Statistical Illustration   Acrobat Required
Fujiki, H. & Y. Kitamura (2003)

The high-frequency response of exchange rates and interest rates to macroeconomic announcements | Published   ScienceDirect Required
Faust, J., J.H. Rogers, S-Y.B. Wang & J.H. Wright (2003/07)

Imperfect Knowledge and Asset Price Dynamics: Modeling the Forecasting of Rational Agents, Dynamic Prospect Theory and Uncertainty Premia on Foreign Exchange   Adobe Acrobat Required
Frydman, R. & M.D. Goldberg (2003)

Do Fundamentals Matter for the D-Mark/Euro-Dollar? A Regime Switching Approach   Adobe Acrobat Required
Frömmel, M., R. MacDonald & L. Menkhoff (2003)

A Theory of Exchange Rates and the Term Structure of Interest Rates   Adobe Acrobat Required
Lim, H-S. & M. Ogaki (2003)

Net Foreign Assets and Imperfect Pass-through: The Consumption-Real Exchange Rate Anomaly   Adobe Acrobat Required
Tuesta, T. & J. Selaive (2003)

Nonlinearities and Cyclical Behavior: The Role of Chartists and Fundamentalists
Westerhoff, F.H. & S. Reitz (2003)

In search of overshooting and bandwagons in exchange rates   ScienceDirect Required
Pippenger, J. (2003)

Bandwagon effects and run patterns in exchange rates once more   ScienceDirect Required
Rotheli, T.F. (2003)

High-Frequency Principal Components and Evolution of Liquidity in a Limit Order Market   Adobe Acrobat Required
Tyurin, K. (2003)

Real Exchange Rate Misalignments   Adobe Acrobat Required
Terra, M.C.T. & F.E.C. Valladares (2003)

An Intraday Pricing Model of Foreign Exchange Markets
Romeu, R. (2003)

Exploring Elements of Exchange Rate Theory in a Controlled Enivronment   Acrobat Required
Fisher, E. (2003)

Some Like it Smooth, and Some Like it Rough: Untangling Continuous and Jump Components in Measuring, Modeling, and Forecasting Asset Return Volatility
Andersen, T.G., T. Bollerslev & F.X. Diebold (2003)

Abstract: A rapidly growing literature has documented important improvements in volatility measurement and forecasting performance through the use of realized volatilities constructed from highfrequency returns coupled with relatively simple reduced-form time series modeling procedures. Building on recent theoretical results from Barndorff-Nielsen and Shephard (2003c,d) for related bipower variation measures involving the sum of high-frequency absolute returns, the present paper provides a practical framework for non-parametrically measuring the jump component in realized volatility measurements. Exploiting these ideas for a decade of high-frequency five-minute returns for the DM/$ exchange rate, the S&P500 market index, and the 30-year U.S. Treasury bond yield, we find the jump component of the price process to be distinctly less persistent than the continuous sample path component. Explicitly including the jump measure as an additional explanatory variable in an easy-toimplement reduced form model for realized volatility results in highly significant jump coefficient estimates at the daily, weekly and quarterly forecast horizons. As such, our results hold promise for improved financial asset allocation, risk management, and derivatives pricing, by separate modeling, forecasting and pricing of the continuous and jump components of total return variability.

Exchange rates and fundamentals | Alternative   Adobe Acrobat Required
Engel, C. & K.D. West (2003, 2004)

Are Different-Currency Assets Imperfect Substitutes?   Adobe Acrobat Required
Evans, M.D.D. & R.K. Lyons (2003)

Unit Root Tests in Three-Regime SETAR Models   Acrobat Required
Kapetanios, G. & Y. Shin (2003)

What Do We Know about Recent Exchange Rate Models? In-Sample Fit and Out-of-Sample Performance Evaluated   Adobe Acrobat Required
Cheung, Y-W., M.D. Chinn & A. Garcia-Pascual (2003)

A Scapegoat Model of Exchange Rate Fluctuations | Published   Recommended!   Ingenta Select Required
Bacchetta, P. & E. van Wincoop (2004)

Abstract: While empirical evidence finds only a weak relationship between nominal exchange rates and macroeconomic fundamentals, forex markets participants often attribute exchange rate movements to a macroeconomic variable. The variables that matter, however, appear to change over time and some variable is typically taken as a scapegoat. For example, the current dollar weakness appears to be caused almost exclusively by the large current account de cit, while its previous strength was explained mainly by growth differentials. In this paper, we propose an explanation of this phenomenon in a simple monetary model of the exchange rate with noisy rational expectations, where investors have heterogeneous information on some structural parameter of the economy. In this context, there may be rational confusion about the true source of exchange rate fluctuations, so that if an unobservable variable affects the exchange rate, investors may attribute this movement to some current macroeconomic fundamental. We show that this effect applies only to variables with large imbalances. The model thus implies that the impact of macroeconomic variables on the exchange rate changes over time.

Order Flows, Delta Hedging and Exchange Rate Dynamics
Rzepkowski, B. (2004)

Accounting for Exchange Rate Variability in Present-Value Models When the Discount Factor is Near One | Published   Recommended!   Ingenta Select Required
Engel, C. & K.D. West (2004)

Abstract: Nominal exchange rates in low-inflation advanced countries are nearly random walks. Engel and West (2003a) offer an explanation for this in the context of models in which the exchange rate is determined as the discounted sum of current and expected future fundamentals. Engel and West show that if the fundamentals are I(1), then as the discount factor approaches one, the exchange rate becomes indistinguishable from a random walk. An alternative explanation for the random-walk behavior of exchange rates is that there are some unobserved variables that drive exchange rates that follow near random walks. This paper takes the approach that both explanations are possible. We are able to measure how much of exchange-rate variation could be accounted for by the Engel-West explanation, despite the fact that we do not observe the information set of financial markets. We find that the observable fundamentals (money, income, prices, interest rates) may account for about 40 percent of the variance of changes in exchange rates under the assumption of discount factors near unity.

Who Bears the Cost of a Change in the Exchange Rate? The Case of Imported Beer
Hellerstein, R. (2004)

A New Micro Model of Exchange Rate Dynamics
Evans, M.D.D. & R.K. Lyons (2004)

Exchange rates and interest rates: can term structure models explain currency movements?   ScienceDirect Required
Inci, A.C. & B. Lu (2004)

Can Fluctuations in the Consumption-Wealth Ratio Help to Predict Exchange Rates?   Adobe Acrobat Required
Selaive, J. & V. Tuesta (2004)

Exchange Rate Dynamics: Where is the Saddle Path?   Adobe Acrobat Required
Cheung, Y-W., J. Gardeazabal & J. Vazquez (2004)

The Forward Premium Puzzle in a Model of Imperfect Information: Theory and Evidence   Acrobat Required
Albuquerque, R. (2004)

Measuring Tail Thickness under GARCH and an Application to Extremal Exchange Rate Changes   Acrobat Required
Wagner, N. & T. Marsh (2004)

International Capital Markets and Foreign Exchange Risk   Acrobat Required
Brennan, M. & Y. Xia (2004)

Identification and estimation of exchange rate models with unobservable fundamentals | Published   Blackwell Synergy Required   Acrobat Required
Chambers, M.J. & J.R. McCrorie (2004/06)

Does the World Real Interest Rate Affect the Real Exchange Rate? The South East Asian Experience   Acrobat Required
Gente, K. & M. Leon-Ledesma (2004)

Foreign exchange exposure of exporting and importing firms   ScienceDirect Required
Pritamani, M.D., D.K. Shome & V. Singal (2004)

Exchange Rate Puzzles: A Tale of Switching Attractors | Published   Acrobat Required   ScienceDirect Required
De Grauwe, P. & M. Grimaldi (2004/05)

Productivity, Tradability, and the Long-Run Price Puzzle
Bergin, P., R. Glick & A.M. Taylor (2004)

From Heterogeneous expectations to exchange rate dynamics   Acrobat Required
Neuberg, L., P. Protin & C. Louargant (2004)

Testing the monetary model of exchange rate determination: a closer look at panels   ScienceDirect Required
Rapach, D.E. & M.E. Wohar (2004)

Volatility Comovement: A Multifrquency Approach
Calvet, L.E., A.J. Fisher & S.B. Thompson (2004)

Fractional cointegration and real exchange rates   ScienceDirect Required
Caporale, G.M. & L.A. Gil-Alana (2004)

Markov Switching Regimes In A Monetary Exchange Rate Model | Published   Acrobat Required   ScienceDirect Required
Froemmel, M., R. Macdonald & L. Menkhoff (2004/2005)

Exchange Rate Behavior and Exchange Rate Puzzles: Why the XVIII Century Might Help   Acrobat Required
Sanchez, R.T., J.G. Biscarri & F.P. de Gracia (2004)

Currency risk in emerging equity markets   ScienceDirect Required
Phylaktis, K. & F. Ravazzolo (2004)

Modelling Exchange Rate Volatility in the Run-up to EMU using a Markov Switching GARCH Model   Adobe Acrobat Required
Frommel, M. (2004)

Monetary Policy and Long-Horizon Uncovered Interest Parity
Chinn, M.D. & G. Meredith (2004)

Exchange Rates and Markov Switching Dynamics   Acrobat Required
Cheung, Y-W. & U.G. Erlandsson (2004)

Trade Openness And Real Exchange Rate Volatility: Panel Data Evidence   Acrobat Required
Calderon, C. (2004)

A Guided Tour of the Market Microstructure Approach to Exchange Rate Determination | Published   Blackwell Synergy Required   REVIEW PAPER
Vitale, P. (2004/07)

Should the Exchange Rate be in the Monetary Policy Objective Function?   Acrobat Required
Kirsonova, T., C. Leith & S. Wren-Lewis (2004)

The Rise of Fund Managers in Foreign Exchange
Gehrig, T. & L. Menkhoff (2004)

The Fit of Dynamic Equilibrium Models of Exchange Rate   Acrobat Required
Martín, J.A.J. & R.F. de Frutos (2004)

An Empirical Study of Liquidity and Information Effects of Order Flow on Exchange Rates
Breedon, F. & P. Vitale (2004)

Risk management for an internationally diversified portfolio   Acrobat Required
Menoncin, F. (2004)

Real-Time Price Discovery in Stock, Bond and Foreign Exchange Markets | Published   ScienceDirect Required   Acrobat Required
Andersen, T.G., T. Bollerslev, F.X. Diebold & C. Vega (2004/07)

Limited participation and exchange rate dynamics : does theory meet the data? | Published   Acrobat Required   ScienceDirect Required
Karame, F., L. Patureau & T. Sopraseuth (2004/08)

Do Currency Markets Absorb News Quickly? | Published   ScienceDirect Required
Evans, M.D.D. & R.K. Lyons (2005)

Meese-Rogoff Redux: Micro-Based Exchange Rate Forecasting | Alternative
Evans, M.D.D. & R.K. Lyons (2005)

Testing Uncovered Interest Parity at Short and Long Horizons during the Post-Bretton Woods Era
Chinn, M.D. & G. Meredith (2005)

Testing Long-Horizon Predictive Ability with High Persistence, and the Meese-Rogoff Puzzle   Blackwell Synergy Required
Rossi, B. (2005)

Do Financial Market Variables Show (Symmetric) Indicator Properties Relative to Exchange Rate Returns?
Castren, O. (2005)

Dealer behavior and trading systems in foreign exchange markets   ScienceDirect Required
Bjønnes, G.H. & D. Rime (2005)

The U.S. Current Account and the Dollar
Blanchard, O., F. Giavazzi & F. Sa (2005)

Liquidity provision in the overnight foreign exchange market   ScienceDirect Required
Bjønnes, G.H., D. Rime & H.O.Aa. Solheim (2005)

Exchange rates and fundamentals: new evidence from real-time data   ScienceDirect Required
Ehrmann, M. & M. Fratzscher (2005)

Slow Passthrough Around the World: A New Import for Developing Countries?
Frankel, J.A., D.C. Parsley & S-J. Wei (2005)

Fundamental and Non-Fundamental Equilibria in the Foreign Exchange Market: A Behavioural Finance Framework
de Grauwe, P., R. Dieci & M. Grimaldi (2005)

Heterogeneity of agents, transactions costs and the exchange rate   Recommended!   ScienceDirect Required
De Grauwe, P. & M. Grimaldi (2005)

Abstract: We develop a model of the exchange rate that has two features. First, there are non-linearities that arise from the existence of transaction costs in goods markets. Second, the model assumes heterogeneous agents who use simple forecasting rules, the ‘fitness’ of which is then controlled ex post by checking their profitability, and by switching to the more profitable rules. This model is capable of reproducing the empirical puzzles observed in exchange markets (disconnect puzzle, excess volatility, fat tails, volatility clustering). We analyse some policy implications of this type of modelling of the exchange rate.

Market microstructure: A survey of microfoundations, empirical results, and policy implications   ScienceDirect Required   REVIEW PAPER
Biais, B., L. Glosten & C. Spatt (2005)

Do Demand Curves for Currencies Slope Down? Evidence from the MSCI Global Index Change
Hau, H., M. Massa & J. Peress (2005)

Exchange rates and fundamentals: evidence on the economic value of predictability   ScienceDirect Required
Abhyankar, A., L. Sarno & G. Valente (2005)

The impact of macroeconomic surprises on spot and forward foreign exchange markets   ScienceDirect Required
Simpson, M.W., S. Ramchander & M. Chaudhry (2005)

The Exchange Rate and its Fundamentals in a Complex World   Blackwell Synergy Required
De Grauwe, P. & M. Grimaldi (2005)

The euro at five: Short-run pain, long-run gain?   ScienceDirect Required
Rogoff, K. (2005)

The euro and the dollar 6 years after creation   ScienceDirect Required
Mussa, M. (2005)

The euro–dollar exchange rate defies prediction   ScienceDirect Required
Salvatore, S. (2005)

Regime-Switching Behavior of the Term Structure of Forward Markets
Tchernykh, E. & W.H. Branson (2005)

Smooth-transition error-correction in exchange rates   ScienceDirect Required
McMillan D.G. (2005)

Feedback trading and autocorrelation interactions in the foreign exchange market: Further evidence   ScienceDirect Required
Laopodis, N.T. (2005)

Noise trading and delayed exchange rate overshooting   ScienceDirect Required
Pierdzioch, C. (2005)

Rational Inattention: A Solution to the Forward Discount Puzzle
Bacchetta, P. & E. van Wincoop (2005)

Modeling Exchange-Rate Passthrough After Large Devaluations |

Published   ScienceDirect Required
Burstein, A., M. & S. Rebelo (2005/07)

The Exchange Rate Forecasting Puzzle   Adobe Acrobat Required
Vitek, F. (2005)

Revisiting the Martingale hypothesis for exchange rates   Acrobat Required
Lee, Y-S., T-H. Kim & P. Newbold (2005)

Understanding Order Flow
Evans, M.D.D. & R.K. Lyons (2005)

Stock prices and exchange rate dynamics   ScienceDirect Required
Phylaktis, K. and Ravazzolo, F. (2005)

What Defines 'News' in Foreign Exchange Markets?
Dominguez, K. & F. Panthaki (2005)

Explaining exchange rate dynamics - the uncovered equity return parity condition   Acrobat Required
Cappiello, L., E. Krylova & R.A. De Santis (2005)

Monetary policy and the illusionary exchange rate puzzle   Acrobat Required
Bjørnland, H.C. (2005)

Foreign Exchange Market Microstructure   Acrobat Required
Evans, M.D.D. (2005)

Arbitrage in the foreign exchange market: Turning on the microscope   Acrobat Required
Akram, Q.F., D. Rime & L. Sarno (2005)

Investing in Foreign Currency is like Betting on your Intertemporal Marginal Rate of Substitution   Acrobat Required
Lustig, H. & A. Verdelhan (2005)

New Evidence on the Forward Unbiasedness Hypothesis in the Foreign Exchange Market   Acrobat Required
Nikolaou, K. & L. Sarno (2005)

Non-Linearities in the Relation between the Exchange Rate and its Fundamentals   Adobe Acrobat Required
Altavilla, C. & P. De Grauwe (2005)

The Information in Long-Maturity Forward Rates: Implications for Exchange Rates and the Forward Premium Anomaly
Boudoukh, J., M. Richardson & R. Whitelaw (2005)

Exchange Rate Pass-through into Import Prices   Ingenta Select Required
Campa, J.M. & L.S. Goldberg (2005)

A Note on the Foreign Exchange Market Efficiency Hypothesis: Does Small Sample Bias affect Inference?   Acrobat Required
Al-Zoubi, H.A. & E. Daal (2005)

A semiparametric GARCH model for foreign exchange volatility   ScienceDirect Required
Yang, L. (2006)

Time-varying risk, interest rates, and exchange rates in general equilibrium   Acrobat Required
Alvarez, F., A. Atkeson & P.J. Kehoe (2006)

Uncovered Interest Parity   REVIEW PAPER
Isard, P. (2006)

A Market Microstructure Analysis of Foreign Exchange Intervention | Alternative   Acrobat Required
Vitale, P. (2006)

The Forward Exchange Rate Bias Puzzle: Evidence from New Cointegration Tests   Acrobat Required
Aggarwal, R., B.M. Lucey & S.K. Mohanty (2006)

Uncovering Yield Parity: A new insight into the UIP puzzle through the stationarity of long maturity forward rates   Acrobat Required
Darvas, Z., G. Rappai & Z. Schepp (2006)

Another look at long-horizon uncovered interest parity   Acrobat Required
Montañés, A. & M. Sanso-Navarro (2006)

The microstructure approach to exchange rates: a survey from a central bank’s viewpoint   REVIEW PAPER
Gereben, A., G. Gyomai & N. Kiss M. (2006)

Towards Decoding Currency Volatilities   Acrobat Required
Juttner, D.J. & W. Leung (2006)

Fundamental volatility is regime specific   Acrobat Required
Arnold, I.J.M., R. MacDonald & C.G. de Vries (2006)

Learning to Forecast the Exchange Rate: Two Competing Approaches   Acrobat Required
De Grauwe, P. & A. Markiewicz (2006)

Profits and Speculation in Intra-Day Foreign Exchange Trading | Published   Acrobat Required   ScienceDirect Required
Mende, A. & L. Menkhoff (2006)