Abstract This paper empirically examines the likelihood of any long-run relationship between real exchange rate and real interest rate (RERI) differentials in China using vector autoregressive model (VAR) and hybrid cointegration methodology. The preliminary results based on some limited monthly data are indicative of a rather weak long run relationship. However, the empirical investigation als...

This paper estimates the foreign exchange rate exposure of 6,917 U.S. nonfinancial firms on the basis of stock prices and corporate cash flows. The results show that several firms are significantly exposed to at least one of the foreign exchange rates Canadian Dollar, Japanese Yen and Euro, and significant exposures are more frequent at longer horizons. The percentage of firms for which stock p...

The paper examines the economic role of modelling information on the decision problem of an exporting firm under exchange rate risk and hedging. Information is described in terms of market transparency, i.e., a publicly observable signal conveys more information about the random foreign exchange rate. We analyze the interaction between market transparency and the ex ante expected utility of the...

We consider two types of rms both operating in two countries. The demand side of the markets of the two countries are separated and each type of rm produces its good in one of these countries. We study the e ect of an exchange rate change on the competitive equilibrium prices in each country. When producing for the foreign market causes the same costs as producing for the home market then the `...

This note uses a nonlinear structural vector autoregression model to empirically investigate the effectiveness of official foreign exchange (FX) interventions in an economy when interest rates are constrained to the zero level, based on Japanese data in the 1990s. The model allows us to estimate the effects of FX interventions operating through different channels. We find that FX interventions ...

Terrorism, political system instability and currency rate fluctuations are the three most evident issues of 21st century. In this study, comparative analysis is performed to check the impact of all these issues on PSX Volatility. EGARCH (1,1) approach is used on four different kinds of data collected from 1st January 2000 to 31st December 2015. Terrorist events, FX return fluctuations with rest...

This paper addresses the question of how exchange rates affect consumer demand in markets where advertising plays an important role. We identify an effect that has not been emphasized in the existing literature: when foreign exchange rates appreciate, a foreign product becomes more expensive to domestic consumers, but at the same time, advertising becomes cheaper for the foreign advertiser. Thu...

This paper analyzes the short-term effects of foreign capital flows on aggregate demand in Mexico: their magnitude, transmission channels, and the possible influence of the country’s choice of exchange rate regime. The study is motivated by the introduction of a floating system in December 1994, in a context of renewed volatility of international capital flows. During the band period, in the ea...