scholarly journals The Response of G7 Real Exchange Rates to Oil Price Shocks

2018 ◽  
Vol 10 (4) ◽  
pp. 191
Author(s):  
Moayad H. Al Rasasi
Keyword(s):  
Monetary Policy ◽  
Exchange Rate ◽  
Exchange Rates ◽  
Forecast Error ◽  
Supply And Demand ◽  
Real Exchange Rates ◽  
Aggregate Demand ◽  
Demand Shocks ◽  
Oil Supply ◽  
Exchange Rate Shocks

This paper evaluates the response of G7 real exchange rates to oil supply and demand shocks developed by Kilian (2009). We find evidence suggesting that oil shocks are associated with the appreciation (depreciation) of real exchange rates for oil exporting (importing) countries. Further evidence, based on the analysis of forecast error variance decomposition, indicates that oil-specific demand shocks are the main contributor to variation in real exchange rates, whereas oil supply shocks contribute the least. Finally, regarding the role of monetary policy in responding to oil and exchange rate shocks, we find evidence showing monetary policy reacts only to oil-specific demand and aggregate demand shocks in three countries, whereas monetary policy responds to real exchange rate fluctuations in four countries.

scholarly journals Monetary Policy and the Predictability of Nominal Exchange Rates

2020 ◽  
Author(s):  
M S Eichenbaum ◽  
B K Johannsen ◽  
S T Rebelo
Keyword(s):  
Monetary Policy ◽  
Exchange Rate ◽  
Exchange Rates ◽  
Real Exchange Rate ◽  
Open Economy ◽  
Real Exchange Rates ◽  
Nominal Exchange Rate ◽  
Medium Size ◽  
Inflation Rates ◽  
Nominal Exchange Rates

Abstract This article studies how the monetary policy regime affects the relative importance of nominal exchange rates and inflation rates in shaping the response of real exchange rates to shocks. We document two facts about inflation-targeting countries. First, the current real exchange rate predicts future changes in the nominal exchange rate. Second, the real exchange rate is a poor predictor of future inflation rates. We estimate a medium-size, open-economy DSGE model that accounts quantitatively for these facts as well as other empirical properties of real and nominal exchange rates. The key estimated shocks that drive the dynamics of exchange rates and their covariance with inflation are disturbances to the foreign demand for dollar-denominated bonds.

scholarly journals THE IMPACT OF BALANCE OF PAYMENTS ON MONETARY POLICY

2019 ◽  
Vol 34 (5) ◽  
pp. 1337-1342
Author(s):  
Vesna Korunoska ◽  
Biljana Mitrovic ◽  
Pavle Trpeski
Keyword(s):  
Exchange Rate ◽  
Exchange Rates ◽  
Foreign Exchange ◽  
Foreign Currency ◽  
Supply And Demand ◽  
Real Exchange Rates ◽  
Balance Of Payments ◽  
Adjustment Process ◽  
The Exchange Rate ◽  
The Impact

The paper monitors the balance of payments in the Republic of N. Macedonia, which determines the amount of the exchange rate through the supply and demand of foreign currency, as well as the impact of the exchange rate on the balance of payments movements. Real exchange rates are essentially equilibrium exchange rates. exchange rate that will keep the balance of payments in balance without taking measures for foreign exchange control, without pronounced inflation and deflationary tendencies and without constant expectation of monetary and foreign exchange reserves.There are several methods by which balance of payments can be established: by devaluation, by currency control and by deflation. When considering the relationship between the national currency exchange rate and the balance of payments of a national economy in terms of their interconnections, one should depart from their causal link of impacts. The exchange rate affects the balance of payments, as well as the balance of payments affects the exchange rate.The first part of the paper elaborates in detail the key activities of the balance of payments adjustment and the exchange rate adjustment, as well as their mutual impact.We use the adjustment mechanism to restore balance once the initial equilibrium has been disturbed. The payment adjustment process takes two different forms. One, under certain conditions, has adjustment factors that automatically contribute to balancing. Second, in the event that automatic adjustment fails to strike a balance, the government adopts a discretionary policy to achieve this goal.

South Africa’s Trade Performance under Alternative Exchange Rate Regimes

2018 ◽  
Vol 10 (6) ◽  
pp. 261
Author(s):  
Romaine Patrick ◽  
Phocenah Nyatanga
Keyword(s):  
South Africa ◽  
Exchange Rate ◽  
Exchange Rates ◽  
Exchange Rate Regime ◽  
Real Exchange Rates ◽  
Series Data ◽  
Growth Strategies ◽  
The Real ◽  
Real Price ◽  
Floating Exchange Rate

This study examined the effect exchange rates have on import and export volumes under alternative exchange rate policies adopted in South Africa over the period 1960 to 2017. Using quarterly time series data for the stated period, a log-linear error correction model is employed to estimate the country’s export and import elasticities, taking into account Gross Domestic Product (GDP), the real price of exports, the real price of imports and real exchange rates. Using the freely floating exchange rate regime as the base period, the study concluded that both export and import volumes are lower under a system of fixed exchange rates. Export and import volumes were also found to be lower under the dual exchange rate regime, relative to the freely floating exchange rate regime. In accordance with export-led growth strategies, exports were found to be higher and imports lower under a managed floating exchange rate regime. It is therefore recommended that South Africa revert to a more managed exchange rate regime, until the South African economy is developed to accommodate a freely floating exchange rate regime.

scholarly journals Boom Goes the Price: Giant Resource Discoveries and Real Exchange Rate Appreciation

2020 ◽  
Vol 130 (630) ◽  
pp. 1715-1728 ◽  
Author(s):  
Torfinn Harding ◽  
Radoslaw Stefanski ◽  
Gerhard Toews
Keyword(s):  
Exchange Rate ◽  
Exchange Rates ◽  
Real Exchange Rate ◽  
Direct Evidence ◽  
Oil And Gas ◽  
Real Exchange Rates ◽  
Labour Productivity ◽  
Dutch Disease ◽  
The Real ◽  
Traded Goods

Abstract We estimate the effect of giant oil and gas discoveries on bilateral real exchange rates. A giant discovery with the value of 10% of a country’s GDP appreciates the real exchange rate by 1.5% within ten years following the discovery. The appreciation starts before production begins and the non-traded component of the real exchange rate drives the appreciation. Labour reallocates from the traded goods sector to the non-traded goods sector, leading to changes in labour productivity. These findings provide direct evidence on the channels central to the theories of the Dutch disease and the Balassa–Samuelson effect.

Sign in / Sign up

Export Citation Format

Share Document