The valuation channel of external adjustment

Ghironi, Fabio; Lee, Jae Woo; Rebucci, Alessandro

doi:10.1016/j.jimonfin.2015.06.004

Cited by 25 publications

(16 citation statements)

References 54 publications

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“…In the context of greater financial integration, valuation effects become more important for the sustainability of net foreign assets (Gourinchas andRey 2007 andGhironi et al 2007). In particular, large and persistent exchange rate shocks are not uncommon and may lead to a significant redistribution of wealth across countries, depending on their net foreign currency position (Lane and Shambaugh 2010a).…”

Section: Introductionmentioning

confidence: 99%

Global Exchange Rate Configurations: Do Oil Shocks Matter?

2016

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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. Abstract Do oil shocks matter for exchange rates? This paper addresses this question based on data on real and nominal exchange rates as well as an exchange market pressure index for 44 advanced and emerging countries. We identify three structural shocks (oil supply, global demand, and oil specific demand) which raise the real oil price and analyse their effect on individual exchange rates. Contrary to the predictions of the theoretical literature, we find no evidence that exchange rates of oil exporters systematically appreciate against those of oil importers after shocks raising the real oil price. However, oil exporters experience significant appreciation pressures following an oil demand shock, which they tend to counter by accumulating foreign exchange reserves. Results for general commodity exporters are similar, showing minor differences compared with oil exporters. Terms of use: Documents in

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Section: Introductionmentioning

confidence: 99%

Global Exchange Rate Configurations: Do Oil Shocks Matter?

2016

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“…Asset trading is subject to …nancial intermediation costs, following an approach along the lines of Ghironi et al (2007). The model also includes investment in capital, which is an additional production factor besides labor.…”

Section: Theoretical Modelmentioning

confidence: 99%

“…Note that a large value of means that the Home country supplies most of the tradable goods on the world markets and not that few imported goods are consumed in either country. 20 Such a parameterization is employed in order to be able to replicate Woodford's (2010) exercise of analyzing di¤erent degrees of "trade integration" (and their interaction with …nancial integration), in particular the small open-economy limit ( ! 0) and the case of two countries of equal size ( = 1 2 ).…”

Section: Householdsmentioning

confidence: 99%

Financial Globalization and Monetary Transmission

Meier¹

2013

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This paper analyzes the way in which international financial integration affects the transmission of monetary policy in a New Keynesian open economy framework. It extends Woodford's (2010) analysis to a model with a richer financial markets structure, allowing for international trading in multiple assets and subject to financial intermediation costs. Two different forms of financial integration are considered, in particular an increase in the level of gross foreign asset holdings and a decrease in the costs of international asset trading. The simulations in the calibrated model show that none of the analyzed forms of financial integration undermine the effectiveness of monetary policy in influencing domestic output and inflation. Under realistic parameterizations, monetary policy is more, rather than less, effective as the positive impact of strengthened exchange rate and wealth channels more than offsets the negative impact of weakened interest rate channels. The paper also analyzes the interaction of financial integration with trade integration, varying both the importance of trade linkages and the degree of exchange rate pass-through. These interactions show that the positive effects of financial integration are amplified by trade integration. Overall, monetary policy is most effective in parameterizations with the highest degree of both financial and real integration. JEL codes: E52, F41, F42, F47

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“…To reliably incorporate reserve asset liquidity into a DGE framework, we bring insights from a new branch of monetary economics-with Lagos (2010) at the forefront-that pioneers a new 1 For a more comprehensive literature review, see Bernanke (2005); Lane and Milesi-Ferretti (2007a); Ghironi, Lee, and Rebucci (2007); Gourinchas and Rey (2007); McGrattan and Prescott (2007); Warnock and Warnock (2009);and Obstfeld, Shambaugh, and Taylor (2010). 2 See, for example, Bird and Rajan (2003), Rodrik (2006), Aizenman and Lee (2008), Cheung and Qian (2009), and Obstfeld, Shambaugh, and Taylor (2010).…”

Section: Introductionmentioning

confidence: 99%