Monetary policy, exchange rates, and investment in a Keynesian economy

Gavin, Michael

doi:10.1016/0261-5606(92)90039-z

Cited by 21 publications

(20 citation statements)

References 9 publications

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“…The cointegration coefficients relative to the measures of international financial integration (IFI) confirm our predictions (Hooper and Morton, 1982;Obstfeld, 1984;Gavin, 1992). We provide evidence of a long-term effect of RER depreciation of IFI for the region of SSEA.…”

Section: Estimation Of Long Run Relationship and Interpretation Of Resupporting

confidence: 79%

“…Obstfeld (1984). and Gavin (1992). We confirm the effect of long-term depreciation of the IFI on RER in the SSEA region.…”

Section: Conclusion and Recommendationsupporting

confidence: 72%

“…Hooper and Morton (1982) develop a model in which exogenous shocks of trade create, in the long run, a positive correlation between NFA and RER. In a more complete theoretical model, Gavin (1992) shows that exogenous shocks of wealth entail a positive correlation between NFA and RER, if the condition of Marshall-Lerner is satisfied. The idea is that in equilibrium a country having a negative NFA must have a trade surplus to finance the payment of interest and dividends of these foreign assets.…”

Section: Exhange Rate Behavior and Financial Integrationmentioning

confidence: 99%

“…a RER depreciation (appreciation) is accompanied with a surplus (deficit) of the current account. Hooper and Morton (1982) and Gavin (1992) present the relationship between Net Foreign Asset (NFA) and RER. Hooper and Morton (1982) develop a model in which exogenous shocks of trade create, in the long run, a positive correlation between NFA and RER.…”

Section: Exhange Rate Behavior and Financial Integrationmentioning

confidence: 99%

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The Effect of Exchange Rate Disequilibrium and Financial Integration on Economic Growth

Sarkar¹,

Amor²

2009

IJEF

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We identify the determinants of the equilibrium real exchange rates (RER) in 10 selected countries of South and South East Asia and estimate the RER distortion by testing the effect of international financial integration (IFI) on economic growth. We use a simple model that determines the equilibrium RER and a dynamic model of endogenous growth that traces the effect of the RER distortion. We applied the techniques of non-stationary dynamic panel, the tests of panel cointegration, and the method of least squared dynamics (DOLS) to estimate the relationship of cointegration. We also use the technique of Generalized Moments Method (GMM) in the system as applied to panel data to estimate the equation of dynamic growth. The IFI constitutes an important factor of long-term RER. An increase of it led to a long-term RER depreciation in the region. The evolution of the RER distortion for 1979-2004 was persevering and recurring: it was an alternation between periods of RER overvaluation and undervaluation in the region. The RER fluctuation in the short-term played against economic growth.

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Section: Estimation Of Long Run Relationship and Interpretation Of Resupporting

confidence: 79%

“…Obstfeld (1984). and Gavin (1992). We confirm the effect of long-term depreciation of the IFI on RER in the SSEA region.…”

Section: Conclusion and Recommendationsupporting

confidence: 72%

Section: Exhange Rate Behavior and Financial Integrationmentioning

confidence: 99%

Section: Exhange Rate Behavior and Financial Integrationmentioning

confidence: 99%

See 2 more Smart Citations

The Effect of Exchange Rate Disequilibrium and Financial Integration on Economic Growth

Sarkar¹,

Amor²

2009

IJEF

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“…In a more complex theoretical model, Gavin (1992) shows that exogenous shocks to wealth entail a positive correlation between net foreign assets and real exchange rates, if the Marshall-Lerner condition is satisfied.…”

Section: Exchange Rates and Net Foreign Holdings Of A Country's Assetsmentioning

confidence: 99%

Real financial market exchange rates and capital flows

Gelman

Jochem

Reitz

et al. 2015

Journal of International Money and Finance

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in Title: Real Financial Market Exchange Rates and Capital FlowsAuthor: Maria Gelman, Axel Jochem, Stefan Reitz and Mark P. Taylor Abstract: Foreign exchange rates, asset prices and capital movements are expected to be closely related to each other as international capital markets become more and more integrated. This paper provides new empirical evidence from an index of exchange-rate adjusted cross-country asset price ratios, which may be interpreted as a real effective financial exchange rate. The integrated stock-flow approach reveals that a county's real effective financial exchange rate is co-integrated with international investors' net foreign holding of its assets. The associated error correction equations have useful interpretations against the backdrop of uncovered return parity and investor portfolio rebalancing behavior. This paper provides new empirical evidence from an index of exchange-rate adjusted crosscountry asset price ratios, which may be interpreted as a real effective financial exchange rate. The integrated stock-flow approach reveals that a country's real effective financial exchange rate is cointegrated with international investors' net foreign holdings of its assets.The associated error correction equations have useful interpretations against the backdrop of uncovered return parity and investor portfolio rebalancing behavior. This paper provides new empirical evidence from an index of exchange-rate adjusted crosscountry asset price ratios, which may be interpreted as a real effective financial exchange rate. The integrated stock-flow approach reveals that a country's real effective financial exchange rate is cointegrated with international investors' net foreign holdings of its assets.The associated error correction equations have useful interpretations against the backdrop of uncovered return parity and investor portfolio rebalancing behavior.JEL: F31, G15, E58

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Devaluation, the Terms of Trade, and Investment in a Keynesian Economy

Gavin

1993

Open-Economy Macroeconomics

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Monetary policy, exchange rates, and investment in a Keynesian economy

Cited by 21 publications

References 9 publications

The Effect of Exchange Rate Disequilibrium and Financial Integration on Economic Growth

The Effect of Exchange Rate Disequilibrium and Financial Integration on Economic Growth

Real financial market exchange rates and capital flows

Devaluation, the Terms of Trade, and Investment in a Keynesian Economy

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