Judy Shelton on currency manipulation.
Category Archives: exchange rates
A New Approach to Tackling Chinese Currency Manipulation That I Do Not Understand
From Bloomberg:
President Donald Trump’s administration is considering a new tactic to discourage China from undervaluing its currency that falls short of a direct confrontation…
Exchange Rate Prediction Redux
That’s the title of a new European Central Bank working paper (coauthored with Yin-Wong Cheung (City U HK), Antonio Garcia Pascual (Barclay’s), and Yi Zhang (U. Wisc.)) just released.
The President Asks a Good Macroeconomics Question
But he asks it at 3AM, and asks General Flynn.
MacParity Defined Undervaluations: 3.7%, 8.5%, 50.2%
Those are estimated amounts of currency undervaluation, using the Big Mac index and the Penn Effect as of July 2016. Guess which currency is 3.7%, and which currency is 50.2%.
What Explains the Trump Dollar?
Elevated real interest rates and policy uncertainty explain a dollar about 4% higher than election day.
Guest Contribution: “The Impact of Real Exchange Rate Shocks on Manufacturing Workers: An Autopsy from the MORG”
Today we are pleased to present a guest contribution written by Douglas L. Campbell (New Economic School, Moscow) and Lester Lusher (UC Davis).
Guest Contribution: “Five Key Factors for 2017”
Today, we present a guest post written by Jeffrey Frankel, Harpel Professor at Harvard’s Kennedy School of Government, and formerly a member of the White House Council of Economic Advisers.
A Big MacParity Guide to Undervalued Currencies
China is not high on the list for “day one sanctions” if one were to look at this fast-food data.
Figure 1: Log relative dollar price of Big Mac against dollar price of US Big Mac (July 2016) versus log relative per capita income in PPP terms (2016 estimates); regression fit from quadratic specification (black dots), and 90% prediction interval (gray dots). Source: Economist, World Bank World Development Indicators, and author’s calculations. Data [XLSX]
Using the methodology outlined in this post, it’s clear that by the price criterion, Russia’s currency is much more undervalued (at 50% in log terms) than China’s.
US Financial Conditions and Emerging Market Stress: The Outlook
From NYT:
…around the globe, the surge in the dollar is provoking financial jitters.
Emerging market countries and corporations that have been binging on cheap dollar debt for more than a decade now face a spike in servicing costs and elevated debt burdens.