Nonlinear adjustment to purchasing power parity in the post-Bretton Woods era

Article Abstract:

This paper tests the efficiency of dollar exchange rate black-markets for the currencies of six formerly socialist countries of Eastern Europe, under conditions of imperfect information, high transaction costs and pronounced turbulence due to political and economic crisis and reform. We find evidence of volatility spillovers in conditional mean affecting only the markets for the Bulgarian lev and Rumanian lei, and limited evidence of volatility spillovers in conditional variance which imply the possibility of some policy coordination emanating from the Soviet Union. Nevertheless, on balance our results lend broad support to the efficiency of exchange rate black-markets, and to previous results concerning floating exchange rate systems in general. [C] 2001 Elsevier Science Ltd. All rights reserved. JEL classification: G12; F31 Keywords: Exchange rates; Black-markets; Market efficiency; Volatility spillovers

Prices and rates, Money

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Prewar and postwar macroeconomic uncertainty: an international perspective

Article Abstract:

Time series on U.S. international macroeconomic variables from the prewar period are compared to postwar data to explore whether the uncertainty experienced by economic agents differs over the two historical time periods. Conditional time series measures of uncertainty reveal that shocks to the time series appear to raise the level of uncertainty more dramatically in the postwar period, but the series exhibit more persistence in volatility in the prewar period. We conclude that the nature of uncertainty differs in the prewar and postwar periods and that these differences are likely to have implications for the behavior of economic agents.

Economics, Research and Development in the Social Sciences and Humanities, Research, Brief Article, Economic research

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