Search Results
Journal Article
Capital controls by any other name
The embrace of ad hoc capital controls to address temporary market inefficiencies on a case-by-case basis, while pragmatic, perpetuates the view that each capital crisis is an isolated example of failed financial institutions.
Journal Article
Commodity price gains: speculation vs. fundamentals
Commodities of all sorts have risen in price over the past few years. Some say that the prices reflect a bubble, driven by low interest rates and excessive speculation. Others say the price gains can be fully explained by supply and demand.
Journal Article
Speculation in the oil market
Disentangling the true drivers of oil prices is a critical first step for allocating resources and designing good policy.
Journal Article
Mexico's oportunidades program fails to make the grade in NYC
A program that pays poor, rural Mexican families to keep their children in school didn't translate well to New York City. The latter's version will end this summer.
Journal Article
Coming to America: covered bonds?
Ultimately, covered bonds and ABS are complements, not substitutes.
Working Paper
Threshold adjustment in deviations from the law of one price
Using self-exciting threshold autoregressive models, we explore the validity of the law of one price (LOOP) for sixteen sectors in nine European countries. We and strong evidence of nonlinear mean reversion in deviations from the LOOP and highlight the importance of modelling the real exchange rate in a nonlinear fashion in an attempt to measure speeds of real exchange rate adjustment. Using the US dollar as a reference currency, the half-lives of sectoral real exchange rates shocks, calculated by Monte Carlo integration, imply much faster adjustment than the consensus half-life estimates of ...
Working Paper
Asset prices, exchange rates and the current account
This paper analyses the role of asset prices in comparison to other factors, in particular exchange rates, as a driver of the US trade balance. It employs a Bayesian structural VAR model that requires imposing only a minimum of economically meaningful sign restrictions. We find that equity market shocks and housing price shocks have been major determinants of the US current account in the past, accounting for up to 32% of the movements of the US trade balance at a horizon of 20 quarters. By contrast, shocks to the real exchange rate have been much less relevant, explaining less than 7% and ...
Working Paper
Mexico's integration into NAFTA markets: a view from sectoral real exchange rates
Using a self-exciting threshold autoregressive model, we confirm the presence of nonlinearities in sectoral real exchange rate (SRER) dynamics across Mexico, Canada and the US in the pre-NAFTA and post-NAFTA periods. Measuring transaction costs using the estimated threshold bands, we find evidence that Mexico still faces higher transaction costs than their developed counterparts. Trade liberalization is associated with reduced transaction costs and lower relative price differentials among countries. Other determinants of transaction costs are distance and nominal exchange rate volatility. Our ...
Working Paper
Sources of exchange rate fluctuations: are they real or nominal?
I analyze the role of real and monetary shocks on the exchange rate behavior using a structural vector autoregressive model of the US vis--vis the rest of the world. The shocks are identified using sign restrictions on the responses of the variables to orthogonal disturbances. These restrictions are derived from the predictions of a two-country DSGE model. I find that monetary shocks are unimportant in explaining exchange rate fluctuations. By contrast, demand shocks explain between 23% and 38% of exchange rate variance at 4-quarter and 20-quarter horizons, respectively. The contribution of ...
Working Paper
Financial integration and risk-adjusted growth opportunities: a global perspective
This paper documents the dynamics of financial integration for major advanced and emerging markets economies during the 1994-2009 period, assesses whether advances in integration have had a significant direct positive impact on countries' growth opportunities, and identifies some of the channels through which financial integration may indirectly foster growth. Three main results are obtained. First, financial integration has progressed significantly worldwide and has been fastest in emerging markets. Second, a country's speed of integration predicts its future risk-adjusted growth ...