Exchange rates

• November 19, 2010

  Has Exchange Rate Pass-Through Really Declined? Some Recent Insights from the Literature

  Bank of Canada Review - Autumn 2010 Jeannine Bailliu, Wei Dong, John Murray

  Building on an earlier Review article, the authors critically reassess the premise that exchange rate pass-through (ERPT) has declined in light of recent studies of the issue in the context of a dynamic stochastic general-equilibrium framework.

  Content Type(s): Publications, Bank of Canada Review articles Topic(s): Economic models, Exchange rates, Inflation and prices, Monetary policy framework

• The Effect of Exchange Rate Movements on Heterogeneous Plants: A Quantile Regression Analysis

  Staff Working Paper 2010-25 Ben Tomlin, Loretta Fung

  In this paper, we examine how the effect of movements in the real exchange rate on manufacturing plants depends on the plant's placement within the productivity distribution. Appreciations of the local currency expose domestic plants to more competition from abroad as export opportunities shrink and import competition intensifies.

  Content Type(s): Staff research, Staff working papers Topic(s): Exchange rates, Market structure and pricing, Productivity JEL Code(s): D, D2, D21, F, F1, L, L1, L16, L6, L60

• Exchange Rate Fluctuations, Plant Turnover and Productivity

  Staff Working Paper 2010-18 Ben Tomlin

  In a small open economy fluctuations in the real exchange rate can affect plant turnover, and thus aggregate productivity, by altering the makeup of plants that populate the market. An appreciation of the local currency increases the level of competition in the domestic market as import competition intensifies and export opportunities shrink, forcing less productive plants from the market and compelling new entrants to be more competitive than they otherwise would have been.

  Content Type(s): Staff research, Staff working papers Topic(s): Exchange rates, Market structure and pricing, Productivity JEL Code(s): D, D2, D21, D24, L, L1, L11

• The Role of Expenditure Switching in the Global Imbalance Adjustment

  Staff Working Paper 2010-16 Wei Dong

  In theory, nominal exchange rate movements can lead to “expenditure switching” when they generate changes in the relative prices of goods across countries. This paper explores whether the expenditure-switching role of exchange rates has changed in the current episode of significant global imbalances.

  Content Type(s): Staff research, Staff working papers Topic(s): Exchange rates, International topics JEL Code(s): F, F3, F4

• Market Expectations and Option Prices: Evidence for the Can$/US$ Exchange Rate

  Staff Discussion Paper 2010-2 Alejandro García, Andrei Prokopiw

  Security prices contain valuable information that can be used to make a wide variety of economic decisions. To extract this information, a model is required that relates market prices to the desired information, and that ideally can be implemented using timely and low-cost methods.

  Content Type(s): Staff research, Staff discussion papers Topic(s): Econometric and statistical methods, Exchange rates, Financial markets JEL Code(s): C, C0, C00, C02, G, G1, G13

• What Drives Exchange Rates? New Evidence from a Panel of U.S. Dollar Bilateral Exchange Rates

  Staff Working Paper 2010-5 Jean-Philippe Cayen, Donald Coletti, René Lalonde, Philipp Maier

  We use a novel approach to identify economic developments that drive exchange rates in the long run. Using a panel of six quarterly U.S. bilateral real exchange rates – Australia, Canada, the euro, Japan, New Zealand and the United Kingdom – over the 1980-2007 period, a dynamic factor model points to two common factors.

  Content Type(s): Staff research, Staff working papers Topic(s): Econometric and statistical methods, Exchange rates JEL Code(s): J, J3, J31