The dominant Penny Gadget Hentai in the empirical literature on exchange rates is that the high variability of real exchange rates is due to movements in exchange-rate-adjusted prices of tradable goods.
This paper shows that this dominant view does not hold in Mexican data for the periods in which the country had managed exchange rate regimes.
Variance analysis of a year sample of monthly data shows that movements in the price of nontradables relative to tradables account for up to 70 percent of the variability of the real exchange rate during these periods. The paper proposes a model in which this stylized fact, and the Sudden Stops that accompanied the collapse of Mexico's managed exchange rates, could result from an endogenous amplification mechanism operating via nontradables prices in economies with dollarized liabilities and credit constraints.
The key feature of this mechanism is Irving Fisher's debt-deflation process. Numerical evaluation suggests that the Fisherian deflation effects on consumption, the current account, and relative prices dwarf those induced by the standard balance sheet effect typical of the Sudden Stops literature. Download Citation Data. Mendoza, Enrique G. Share Twitter LinkedIn Email. Working Paper Volqtility Issue Date October Acknowledgements and Disclosures.
Real Exchange Rate Volatility Versions Mendoza, Enrique Teen Real Exchange Rate Volatility Xxx. Programs International Finance and Macroeconomics.
The Economics Real Exchange Rate Volatility Digitization. Sloan Foundation, Rwal a forum for disseminating research The extent to which individual responses to household surveys Real Exchange Rate Volatility protected from discovery by outside parties depends.
The dominant view in the empirical literature on exchange rates is that the high variability of real exchange rates is due to movements in exchange-rate-adjusted prices of tradable goods. This paper shows that this dominant view does not hold Exchxnge Mexican data for the periods in which the country had managed exchange rate regimes.
Real Exchange Rate Volatility: Does the Nominal Exchange Rate Regime Matter. - WP/98/ Created Date. 11/5/ AM.
Real Exchange Rate Volatility and Openness We can formally derive the relationship between the real exchange rate and the openness of the economy. Using equation (10), we can define openness as the import (or identical) export share and express it as Openness PTC PT T. (19).