Today we are fortunate to have a guest contribution written by Jeffrey Frankel, Harpel Professor of Capital Formation and Growth at Harvard University, and former Member of the Council of Economic Advisers, 1997-99. This post is an extended version of an earlier column at Project Syndicate.
Category Archives: exchange rates
Interest Rate Parity and Exogeneity
One of the enduring puzzles of international finance is the fact that the joint hypothesis of uncovered interest parity and rational expectations is consistently rejected, as evidenced by the coefficient estimates in the Fama regression.
Exchange Rate Regimes and the Global Financial Cycle
Relevant or Irrelevant?
Currency Misalignment: A Reprise
As the Congress debates currency manipulation [1], it occurs to me useful to reprise my earlier primer on currency misalignment (first published in March 2010), where misalignment is one component of some definitions of currency manipulation.
April Employment Situation: Revisions, Energy Extraction, Manufacturing
The April Employment release confirmed continued growth in total and private employment. My observations: some modest downward revisions, and some sectoral trends diverge.
Trade (Head)Winds
How Much More Dollar Appreciation?
One important factor in the growth prospects for the US economy is the trajectory of the dollar. [1] If the dollar stabilizes at March levels, US economic growth might rebound. On the other hand, continued appreciation bodes ill. Based on history over the floating rate era, the expected duration of an appreciation is about 5 years (depreciations about 2 years). The current surge in the dollar has only been going on for only slightly over half a year, although when dated from the trough of 2011Q2, it’s been going on just a bit over 4 years. Either way, by this metric, it appears that there is still some additional way to go before the dollar peaks.
World interest rates
Ben Bernanke has joined the blogosphere, offering an invaluable resource for anyone wanting to understand recent economic developments. Last week he had a series of articles examining factors behind the very low real interest rates on long-term bonds.
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Guest Contribution: “Currency politics: Understanding the euro”
Today, we’re fortunate to have a guest contribution by Jeffry Frieden, Stanfield Professor of International Peace at Harvard University, and author of the newly published Currency Politics: The Political Economy of Exchange Rate Policy (Princeton University Press, 2015). This post is based upon a portion of that book.
Fed moves the markets
As widely expected, at Wednesday’s FOMC meeting the Federal Reserve dropped its statement that “the Committee judges that it can be patient in beginning to normalize the stance of monetary policy”, the magic formula that many observers had thought would open the way for a hike in interest rates at the Fed’s June meeting. But the yield on a 10-year U.S. Treasury bond dropped 10 basis points immediately following the FOMC release.
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