Exchange Rates
-
-
Do Central Banks Respond to Exchange Rate Movements? Some New Evidence from Structural Estimation
This paper investigates the impact of exchange rate movements on the conduct of monetary policy in Australia, Canada, New Zealand and the United Kingdom. We develop and estimate a structural general equilibrium two-sector model with sticky prices and wages and limited exchange rate pass-through. -
March 17, 2008
Price Discovery Across Geographic Locations in the Foreign Exchange Market
The ongoing process of price discovery in foreign exchange markets provides valuable information to certain market participants. Recent empirical findings suggest that aggregate measures of order flow convey information about the fundamental value of the exchange rate. Using a market microstructure approach, D'Souza reports on a two-year study of completed transactions within the Canadian and Australian exchange rate markets to examine the relationship between exchange rate returns and trades initiated in different locations. Based on the information content of the trades, he finds that geographic location and hours of operation are two of the factors driving informed interdealer trading. -
The Carry Trade, Portfolio Diversification, and the Adjustment of the Japanese Yen
In this paper, the author considers whether fundamentals or other factors can explain the yen's ongoing weakness. In particular, the importance of capital outflows due to the carry trade and longer-term portfolio investment outflows, which may be delaying the adjustment of the yen, are investigated. A simple portfolio model is developed, composed of a speculative […] -
Testing Uncovered Interest Parity: A Continuous-Time Approach
Nowadays researchers can choose the sampling frequency of exchange rates and interest rates. -
Where Does Price Discovery Occur in FX Markets?
Trades in foreign exchange markets are initiated around the world and around the clock. This study illustrates that trades are more informative when initiated in a local country or in major foreign exchange centers like London and New York. -
October 15, 2007
The Global Foreign Exchange Market: Growth and Transformation
Barker examines changes in the foreign exchange market, which is in a period of transition. Since the mid-1990s, three closely inter-related and mutually reinforcing factors–electronic trading platforms, a changing mix of market participants, and computer-driven algorithmic trading strategies–have been accelerating market growth and are creating a profound structural transformation. As the balance of market participation shifts between bank and non-bank accounts, large and small participants, and domestic and global players, the market is adopting some of the characteristics of an "exchange" model and is arguably becoming more liquid and operationally efficient. -
Canada's Pioneering Experience with a Flexible Exchange Rate in the 1950s: (Hard) Lessons Learned for Monetary Policy in a Small Open Economy
This paper revisits Canada's pioneering experience with floating exchange rate over the period 1950–1962. It examines whether the floating rate was the best option for Canada in the 1950s by developing and estimating a New Keynesian small open economy model of the Canadian economy. -
Multilateral Adjustment and Exchange Rate Dynamics: The Case of Three Commodity Currencies
In this paper, we empirically investigate whether multilateral adjustment to large U.S. external imbalances can help explain movements in the bilateral exchange rates of three commodity currencies – the Australian, Canadian and New Zealand (ACNZ) dollars. -
Gold Prices and Inflation
Using data for 14 countries over the 1994 to 2005 period, we assess the leading indicator properties of gold at horizons ranging from 6 to 24 months.