One of the seminal empirical exchange rate papers is Charles Engel‘s and Jim Hamilton‘s “Long swings in the exchange rate: are they in the data and do markets know it?” (AER, 1990). Think about it – while one often can’t reject the null hypothesis of a random walk in the exchange rate (using typically low-powered tests), the typical floating exchange rate sure doesn’t look like a random walk. What does a Markov switching model applied to the US broad trade weighted real value of the US dollar (instead of bilateral against Deutsche mark, French franc, British pound).
Category Archives: exchange rates
The External Environment and Prospects for GDP Growth
As noted by Jim in his post on the 2022Q3 GDP release, exports and imports accounted (mechanically) for more than 100% of 2022Q3 GDP growth:
Kathryn Dominguez at EconoFact: “Global Repercussions of the Strong Dollar”
From the memo :
Jeffry Frieden: “The Politics of Exchange Rates” (podcast)
The Recent Pound Plunge in Context: 50 Years of the Real Rate
The drop in the pound over the last week was dramatic. But even with the recovery in the currency’s value to pre-mini-budget levels, the pound has been on a downward trend for the past six years, in inflation adjusted terms.
Reserve Currency Status Is No Vaccination against Recklessness – UK Edition
…although it helps.
I never thought an advanced economy government could pursue stupider policies than that implemented under the Trump administration. Consider me corrected on this point – case in point, the United Kingdom in 2022.
Guest Contribution: “The Dollar Dazzles Once More”
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. An earlier version appeared at Project Syndicate.
Guest Contribution: “U.S. Trade Deficits and Exchange Rates”
Today, we’re fortunate to have Willem Thorbecke, Senior Fellow at Japan’s Research Institute of Economy, Trade and Industry (RIETI) as a guest contributor. The views expressed represent those of the author himself, and do not necessarily represent those of RIETI, or any other institutions the author is affiliated with.
Is the Dollar Strong? Or Likely to Get Stronger?
Compared to a sample average, the inflation adjusted dollar is strong. It’s not clear what that means — namely because the (real) dollar is not statistically distinguishable from a unit root process. The dollar is also likely to get stronger, based on historical patterns.
“The Impacts of Crises on the Trilemma Configurations”
Excepting international reserves, trilemma configurations were durable through the global financial crisis. From Aizenman, Chinn and Ito (forthcoming Open Economies Review, 2022) (also NBER WP No. 30406).