Exchange Rate Determination and Optimal Economic Policy Under Various Exchange Rate Regimes: 359 (Lecture Notes in Economics and Mathematical Systems) - Tapa blanda

De Jong, Eelke

 
9783540540212: Exchange Rate Determination and Optimal Economic Policy Under Various Exchange Rate Regimes: 359 (Lecture Notes in Economics and Mathematical Systems)
Tapa blanda
ISBN 10: 3540540210 ISBN 13: 9783540540212
Editorial: Springer, 1991

Sinopsis

1.1 Some characteristics of the floating exchange rate system The flexible exchange rate system has functioned far less satisfactorily than many anticipated in 1973, when the major industrialized countries decided to let their currencies float. The dominant currencies’ exchange rates have fluctuated more 1 than expected. These fluctuations concern both short-term movement- intraday fluctuations and movements during a week or a month - and long­ term changes that last for more than a year. Daily percentage changes of one percent are not unusual for the recent float (see MacDonald, 1988, p.8). However, the release of new information can give rise to much larger changes. For example in August 1987 "the dollar moved down 6 percent in two days based on the July trade figures" (Glynn, 1988, p. 36). For the period 1973-1985 MacDonald (1988, p.10) presents minimum and maximum monthly percentage exchange rate changes. These figures clearly illustrate the magnitude of the volatility and also show that the volatility has not diminished as the experience 2 with floating has increased. In addition to this volatility, exchange rates are also characterized by misalignment: "persistent departure of the exchange rate from its long-run equilibrium" (Williamson, 1983, p.l3). Although the measure of misalignment depends upon the exact definition of the exchange rate’s long-run equilibrium, there is a widespread feeling that during the greater part of the 1970s the dollar was undervalued, whereas it was overvalued during the first half of the 1980s.

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Reseña del editor

1.1 Some characteristics of the floating exchange rate system The flexible exchange rate system has functioned far less satisfactorily than many anticipated in 1973, when the major industrialized countries decided to let their currencies float. The dominant currencies' exchange rates have fluctuated more 1 than expected. These fluctuations concern both short-term movement- intraday fluctuations and movements during a week or a month - and long­ term changes that last for more than a year. Daily percentage changes of one percent are not unusual for the recent float (see MacDonald, 1988, p.8). However, the release of new information can give rise to much larger changes. For example in August 1987 "the dollar moved down 6 percent in two days based on the July trade figures" (Glynn, 1988, p. 36). For the period 1973-1985 MacDonald (1988, p.10) presents minimum and maximum monthly percentage exchange rate changes. These figures clearly illustrate the magnitude of the volatility and also show that the volatility has not diminished as the experience 2 with floating has increased. In addition to this volatility, exchange rates are also characterized by misalignment: "persistent departure of the exchange rate from its long-run equilibrium" (Williamson, 1983, p.l3). Although the measure of misalignment depends upon the exact definition of the exchange rate's long-run equilibrium, there is a widespread feeling that during the greater part of the 1970s the dollar was undervalued, whereas it was overvalued during the first half of the 1980s.

Reseña del editor

This work has two aims. The first is to investigate the causes of the bad performance of many exchange rate models and the second is to determine the optimal exchange rate regime for small countries. With regard to exchange rate performance, the book concludes that the models' bad performance is probably due to the use of semi-reduced form relations in almost all studies on exchange rate determination and to an inappropriate approximation of expectations. Three criteria for approximating expectations are introduced. The book concludes that the rolling regressions technique and multi-state Kalman filters are appropriate procedures for approximating expectations formation. A structural model of exchange rate determination is developed in which exchange rate expectations are approximated by rolling regressions. The book demonstrates how demand functions determine the explanatory power of the exchange rate or interest rate, showing that the derived exchange rate tracks its historical values well. With regard to the second aim of the book - the determining of a small industrial country's optimal exchange rate regime - the book relates this to recent proposals for a European monetary union, with optimal control experiments being used to determine the best means of pegging a small European country's currency to the Deutsche Mark. This monograph on international economics, empirical economics and macroeconomics is intended for the use of researchers.

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Editorial
Springer
Año de publicación
1991
Idioma
Inglés
ISBN 10 
3540540210
ISBN 13 
9783540540212
Encuadernación
Tapa blanda
Número de páginas
280
Contacto del fabricante
no disponible
Persona responsable
CMN Printpool Inh. Mathis Neumann
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Hamburg
Alemania

Otras ediciones populares con el mismo título

9780387540214: Exchange Rate Determination and Optimal Economic Policy Under Various Exchange Rate Regimes (Lecture Notes in Economics & Mathematical Systems)

Edición Destacada

ISBN 10:  0387540210 ISBN 13:  9780387540214
Editorial: Springer Verlag, 1991
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