Measuring the Long Run Real Exchange Rate – Income Relationship

Yanping Chong, Oscar Jorda and Alan M. Taylor have tackled the perennial challenge of measuring the long run relationship between the real exchange rate and per capita income levels. From the abstract to The Harrod-Balassa-Samuelson Hypothesis: Real Exchange Rates and their Long-Run Equilibrium:

Frictionless, perfectly competitive traded-goods markets justify thinking of purchasing power parity (PPP) as the main driver of exchange rates in the long-run. But differences in the traded/non-traded sectors of economies tend to be persistent and affect movements in local price levels in ways that upset
the PPP balance (the underpinning of the Harrod-Balassa-Samuelson hypothesis, HBS). This paper uses panel-data techniques on a broad collection of countries to investigate the long-run properties of the PPP/HBS equilibrium using novel local projection methods for cointegrated systems. …

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The Predictive Content of Commodity Futures: Latest Estimates

Econbrowser readers will know that I’ve long been interested in how derivatives like futures predict commodity prices. An early paper on energy futures, coauthored with my former CEA colleagues Michael LeBlanc and Oli Coibion, was summarized in this 2006 post (paper here). Recently, Oli Cobion and I have updated and expanded our examination, to incorporate for the most recent data, account for GARCH effects, alloow for time variation, and to try to explain why there has been time variation in the deviations in the unbiasedness proposition.

 

From the abstract to our paper:

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“Export or Die”

From today’s Economist, Greg Ip writes:

America’s economic transformation will require businesses to rely less on selling to Americans and more on selling abroad…. The emphasis will be on high-value products and services rather than on labour-intensive items such as furniture and clothing.

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