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172
result(s)
Exchange Rate Pass-Through and the Inflation Environment in Industrialized Countries: An Empirical Investigation
Staff Working Paper 2004-21
Jeannine Bailliu,
Eiji Fujii
This paper investigates the question of whether a transition to a low-inflation environment, induced by a shift in monetary policy, results in a decline in the degree of pass-through of exchange rate movements to consumer prices.
Content Type(s):
Staff research,
Staff working papers
Topic(s):
Exchange rates,
Inflation and prices,
International topics
JEL Code(s):
E,
E3,
E31,
E4,
E42,
F,
F3,
F31
May 22, 2004
Exchange Rate Pass-Through in Industrialized Countries
Economists' long-standing interest in the degree to which exchange rate movements are reflected in prices was rekindled in the 1970s by a combination of rising inflation and the adoption of more flexible exchange rate regimes in many industrialized countries. Specifically, there were concerns that a large currency depreciation could degenerate into an inflationary spiral. Such fears were curtailed in the 1980s and early 1990s as industrialized countries began to reduce and stabilize their inflation rates. The low-inflation period most industrialized countries entered approximately a decade ago coincided with significant exchange rate depreciations that had much smaller effects on consumer prices than expected. This led to a belief that the extent to which exchange rate movements are passed through to consumer prices has declined. In this article, the authors examine why pass-through could be incomplete and review empirical estimates to determine whether pass-through has indeed declined, suggesting possible reasons for this decline and discussing the implications for monetary policy.
Content Type(s):
Publications,
Bank of Canada Review articles
Topic(s):
Exchange rates,
Inflation and prices,
Monetary policy framework
When Bad Things Happen to Good Banks: Contagious Bank Runs and Currency Crises
Staff Working Paper 2004-18
Raphael Solomon
The author develops a twin crisis model featuring multiple banks.
Content Type(s):
Staff research,
Staff working papers
Topic(s):
Exchange rates,
Financial institutions
JEL Code(s):
E,
E5,
E58,
F,
F3,
F30,
G,
G2,
G21
December 22, 2003
Current Account Imbalances: Some Key Issues for the Major Industrialized Countries
The resurgence of sizable current account imbalances in the major economies in recent years, particularly the tripling of the U.S. deficit, has led to renewed academic and public discussions about their sustainability. Jacob's main objective is to show that current account balances are simply the outcome of various relative structural and cyclical forces between trading partners. He reviews the factors behind the changes in the current account positions of the three largest industrial economies (the United States, Japan, and the euro area). Two strong determinants shaping the current account balances are the faster increase in U.S. productivity compared with that of other major economies and, more recently, the loosening in the U.S. fiscal stance. Jacob also reviews a range of outside assessments from such sources as the Organisation for Economic Co-operation and Development and the International Monetary Fund, as well as the academic literature, to determine the possible risks to macroeconomic and financial stability.
Content Type(s):
Publications,
Bank of Canada Review articles
Topic(s):
Exchange rates,
International topics
Anatomy of a Twin Crisis
Staff Working Paper 2003-41
Raphael Solomon
The author presents a model of a twin crisis, in which foreign and domestic residents play a banking game. Both "honest" and run equilibria of the post-deposit subgame exist; some run equilibria lead to a currency crisis, as agents convert domestic currency to foreign currency.
Content Type(s):
Staff research,
Staff working papers
Topic(s):
Exchange rates,
Financial institutions
JEL Code(s):
E,
E5,
E58,
F,
F3,
F30,
G,
G2,
G21
Alternative Targeting Regimes, Transmission Lags, and the Exchange Rate Channel
Staff Working Paper 2003-39
Jean-Paul Lam
Using a closed-economy model, Jensen (2002) and Walsh (2003) have, respectively, shown that a policy regime that optimally targets nominal income growth (NIT) or the change in the output gap (SLT) outperforms a regime that targets inflation, because NIT and SLT induce more inertia in the actions of the central bank, effectively replicating the outcome obtained under precommitment. The author obtains a very different result when the analysis is extended to open-economy models.
Content Type(s):
Staff research,
Staff working papers
Topic(s):
Exchange rates,
Monetary policy framework
JEL Code(s):
E,
E5,
E52,
E58
Real Exchange Rate Persistence in Dynamic General-Equilibrium Sticky-Price Models: An Analytical Characterization
Staff Working Paper 2003-35
Hafedh Bouakez
This paper assesses analytically the ability of dynamic general-equilibrium sticky-price models to generate persistent real exchange rate fluctuations. It develops a tractable general-equilibrium model with Calvo-type price stickiness.
Content Type(s):
Staff research,
Staff working papers
Topic(s):
Economic models,
Exchange rates,
International topics
JEL Code(s):
F,
F3,
F31,
F4,
F41
Nominal Rigidities and Exchange Rate Pass-Through in a Structural Model of a Small Open Economy
Staff Working Paper 2003-29
Steve Ambler,
Ali Dib,
Nooman Rebei
The authors analyze exchange rate pass-through in an estimated structural model of a small open economy that incorporates three types of nominal rigidity (wages and the prices of domestically produced and imported goods) and eight different structural shocks. The model is estimated using quarterly data from Canada and the United States.
Content Type(s):
Staff research,
Staff working papers
Topic(s):
Business fluctuations and cycles,
Economic models,
Exchange rates,
Inflation and prices,
International topics
JEL Code(s):
F,
F2,
F3,
F31,
F33
Monetary Policy in Estimated Models of Small Open and Closed Economies
Staff Working Paper 2003-27
Ali Dib
The author develops and estimates a quantitative dynamic-optimizing model of a small open economy (SOE) with domestic and import price stickiness and capital-adjustment costs. A monetary policy rule allows the central bank to systematically manage the short-term nominal interest rate in response to deviations of inflation, output, and money growth from their steadystate levels.
Content Type(s):
Staff research,
Staff working papers
Topic(s):
Business fluctuations and cycles,
Exchange rates,
Monetary policy transmission
JEL Code(s):
E,
E3,
E31,
E5,
E52,
F,
F2,
F3