International Real Estate Review

Currency depreciation is said to affect domestic output in either direction, depending on the relative strength of its impact on next exports and the cost of imported inputs. Since increased net exports and eventual economic growth affect the demand for housing and increased cost of imported materials that are used in housing construction affects the supply of housing, we assume that currency depreciation could have an impact on housing output. We test our assumption by using time-series data from each of the states in the U.S. and show that when a linear model is estimated, dollar depreciation has short-run effects in 41 states and long-run effects in only three states. However, when dollar depreciation is separated from appreciation and a nonlinear model is estimated, we find short-run asymmetric effects in all of the states and long-run asymmetric effects in 32 states. Additional analysis reveals that while dollar depreciation increases housing output in 10 states, dollar appreciation hurts the output in 11 states, thus supporting the expansionary depreciation of the dollar in the U.S. housing market.

QUANTITATIVE EASING POLICY, EXCHANGE RATES AND BUSINESS ACTIVITY BY INDUSTRY IN JAPAN FROM 2001 TO 2006

This study empirically investigates the dynamic effects of Japan’s quantitative easing (QE) policy on industry-specific business activity using a time-varying parameter model and monthly data spanning 2001–2006. This model yields more reliable and precise results than earlier fixed effects models using quarterly data. The first major finding is that the effect of QE on yen–dollar exchange rates varied during the sampled period and is most evident in the final phases, whereas its effect on stock prices persisted almost continuously. Second, QE’s effect on Japan’s real economy — i.e., on industrial production — varies by industry and over time. Most notably, QE raised production via yen–dollar depreciation in the machinery sector (e.g., general and transport machinery) and the sector including chemicals, non-ferrous metals and iron and steel during its latter phases. This study is the first to investigate how unconventional monetary policy influences Japan’s real economy by analyzing the real exchange rate during the second half of QE implementation in Japan.

The Dynamic Relationship between Oil Prices and Exchange Rates

<p>Using daily data of oil prices and exchange rates of 14 countries for the period January 1999 to November 2014, this study examines the dynamic correlation between oil prices and exchange rates by DCC-GARCH model. The results show the significant negative correlation between oil prices and exchange rates over the period. These results imply that the increase of oil price is coinciding with US dollar depreciation and vice versa. This correlation strengthens in negative direction during financial crisis period, while it shifts to an upward trend after financial crisis period.</p>

The Dynamic Relationship between Oil Prices and Exchange Rates

<p>Using daily data of oil prices and exchange rates of 14 countries for the period January 1999 to November 2014, this study examines the dynamic correlation between oil prices and exchange rates by DCC-GARCH model. The results show the significant negative correlation between oil prices and exchange rates over the period. These results imply that the increase of oil price is coinciding with US dollar depreciation and vice versa. This correlation strengthens in negative direction during financial crisis period, while it shifts to an upward trend after financial crisis period.</p>

Search for quality assets drives world reserves

Subject Global reserves outlook. Significance The growth of the foreign-exchange reserves of emerging and developing economies was a closely followed topic in international finance and policymaking circles in the 2000s. A new strand of academic literature suggests it might be in for a renaissance. Impacts The world will soon take more notice of the worsening US net external debt load. Paradoxically, the US economy generates these liabilities in part because the world demands them. US dollar depreciation will put domestic political pressure on large dollar reserve holders.

EXCHANGE RATE AND US MACROECONOMY: EVIDENCE FROM THE FACTOR-AUGMENTED VECTOR AUTOREGRESSIVE MODEL

This paper aims to examine the macroeffects of exchange rate movements on a wide array of real economic variables in the US in a unifying model. By employing the non-linear factor-augmented vector autoregressive (FAVAR) model with simulation methods, we could trace the effects of exchange rate appreciation and depreciation on a wide array of macroeconomic variables through the impulse response function (IRF). The main findings are: (1) In response to dollar depreciation, import price index (IMP), producer price index (PPI) and CPI increase significantly. The pass-through ratio declines along the distribution chain. (2) Merchandise trade balance, current account balance and output improve facing dollar depreciation. (3) Savings decreases in response to dollar depreciation. (4) Employment and average hourly earnings increase in times of exchange rate depreciation and vice versa. The effects on macroeconomy from appreciation and depreciation seem symmetric. Many other interesting findings are also documented.

Prospective Capital Flows and Currency Movements: U.S. Dollar versus Euro

After experiencing long, multiyear surges and slides in past decades, by summer 2013, the dollar had been range-bound against the euro. In this case, by assessing potential capital flows, students consider whether global currency market trends would propel the dollar higher, or if the past few years were just a pause in a much longer dollar depreciation episode. Suitable for both core and elective MBA courses in global financial markets and international finance, this case explores factors pointing to further euro appreciation and to others favoring the dollar. Sorting through mounds of evidence is necessary before forecasting the exchange rate's likely path. Filtering that evidence requires thinking about FX markets, prospective monetary policies, and past and prospective international capital flows.

Determinants of prices increase of agricultural commodities in a global context

Summary The main objective of this article is to present the determinants of increase in agricultural commodity prices after 2006. The other specific aim is to show the factors affecting agricultural raw materials and food prices in the global context. This article is a review paper of the determinants of recent commodity and food prices spikes. However, it provides an outlook on these determinants that were the most important for the increases in the last decade. The last part of the article (conclusions) to some extent is a synthesis of considerations and includes the authors’ opinions concerning determinants and an attempt to identify which ones were the most important in the growth of agricultural commodity prices. These increases in agricultural commodity prices resulted from many factors and it is very difficult to separate the individual impact of each of them, because they occurred in parallel. However, it is possible to indicate several main reasons for these price increases, which are: adverse changes in supply-demand relations in agricultural markets, increases in oil prices (and increases of the volatility of those prices), development of biofuel production from agricultural commodities (the first generation biofuels), dollar depreciation, an increase in operations of a speculative nature on commodity markets and improper economic policy that created an environment for the growth of prices of agricultural products.

CAN GOLD EFFECTIVELY HEDGE RISKS OF EXCHANGE RATE?

This study tests whether gold can effectively hedge exchange rate risks. We take into account the asymmetric characteristic of exchange rate fluctuations and use the dynamic panel threshold model in order to select gold prices in major gold-related currencies in the world: the Australian dollar, the Canadian dollar, the euro, the Indian rupee, the Japanese yen, the South African rand, and the British pound. Using monthly data from January 1999 to January 2010, with lagged one-period exchange rate returns (US dollar depreciation rate) as the threshold variable, the estimation results suggest that there are two thresholds at –7.5% and –3.7%. These can be divided into regime 1 (exchange rate returns ≤ –7.5%), regime 2 (–7.5% < exchange rate returns ≤ –3.7%), and regime 3 (exchange rate returns > –3.7%). Regarding the effectiveness of gold hedging, regime 2 is higher than is regime 3. The risk hedging effect of regime 1 is not significant because it might be caused by the excessive devaluation of the US dollar in the short-term and the overshooting of the exchange rate adjustment, making gold unable to hedge the devaluation risks of the US dollar.