Like a roller coaster ride, 2011 saw oil prices climb gradually, only to fall dramatically this last week. Here I offer my thoughts on some of the key contributing factors.
Category Archives: exchange rates
“Renminbi Going Global”
That’s the title of a new working paper by Xiaoli Chen (Shandong University) and Yin-Wong Cheung (UCSC). Readers might recognize Cheung as a co-author with G. Ma and R. McCauley on a 2010 BIS paper, discussed in this May 2010 Econbrowser post, and just published in Pacific Economic Review. For anybody who is interested in the latest developments in the Chinese government’s attempts to internationalize the Renminbi, this is essential reading. From the summary of the paper.
Coordinated Forex Intervention “Works”
From Reuters:
A coordinated move by central banks of rich nations to stabilize the yen’s value appeared to be having a decisive effect on Friday, after a sharp rise in the yen after Japan’s devastating earthquake and nuclear crisis raised fears about the global economy.
The Macroeconomic Effects of Large Exchange Rate Appreciations
From the abstract to a new OECD Development Center working paper, by Marcus Kappler, Helmut Reisen, Moritz Schularick and Edouard Turkisch, the results of a large, cross-country study based upon a narrative approach to identifying appreciation episodes:
The study shows that currency appreciations can help to a certain extent in reducing global imbalances, and that it can go along with a shift from a mainly export-based model of growth towards a model with internal sources of growth. The cost in terms of growth would be very limited in the case of developed countries, but somewhat larger for developing countries.
Exchange Rates: Two Stylized Facts and Yet Another (Consequent) Puzzle
My colleague, Charles Engel, has a new paper entitled The Real Exchange Rate, Real Interest Rates, and the Risk Premium, in which he tries to identify what characteristics an exchange rate model must possess in order to explain two stylized facts.
…The well-known interest parity puzzle in foreign exchange markets finds … the high interest rate country tends to have the higher expected return in the short run. The second stylized fact concerns evidence that when a country’s relative real interest rate rises above its average, its currency tends to be stronger than average in real terms.
New indications of inflation
Where are the inflationary pressures?
The Real Value of the Yuan and Inflation
A recent NYT article highlighted the fact that international competitiveness (as defined by macroeconomists) depends on not just the nominal exchange rate, but also relative price levels. From Inflation in China May Limit U.S. Trade Deficit by Keith Bradsher:
Inflation is starting to slow China’s mighty export machine, as buyers from Western multinational companies balk at higher prices and have cut back their planned spring shipments across the Pacific.
Exchange Rate Modelling at AEA
Or, at least one session’s worth of recent thinking on the topic.
Presiding: Philippe Bacchetta (University of Lausanne)
On the Unstable Relationship between Exchange Rates and Macroeconomic Fundamentals, by Philippe Bacchetta (University of Lausanne), and Eric van Wincoop (University of Virginia). Discussed by Ken Kasa (Simon Fraser University).- Order Flow and the Monetary Model of Exchange Rates: Evidence from a Novel Data Set , by Menzie Chinn (University of Wisconsin), and Michael Moore (Queen’s University Belfast). Discussed by Pierre-Olivier Gourinchas (University of California-Berkeley)
- Phoenix Taylor Rule Exchange Rate Forecasting During the Financial Crisis, by David Papell (University of Houston), and Tanya Molodtsova (Emory University) . Discussed by Jan Groen (Federal Reserve Bank of New York).
- The Scapegoat Model of Exchange Rates: An Empirical Test, by Marcel Fratzscher (European Central Bank), Lucio Sarno (Cass Business School), and Gabriele Zinna (Bank of England). Discussed by Nelson Mark (University of Notre Dame).
Europe and China: is this deja vu all over again?
The autumn of 2010 is in some ways a replay of what we saw last spring. Is what we saw then a guide to what’s going to happen next?
Representative Ryan Requests
And Barry Eichengreen anticipates with an answer