Trade deficit surprises and the ex ante volatility of foreign exchange rates

Article Abstract:

A study on the effects of US balance of trade deficit on the ex ante volatility of foreign exchange rates was made. The relationship between the changes in the implied standard deviation (ISD) of major trading currencies and the surprise component of monthly merchandise trade deficits was analyzed. The results showed that larger trade deficits were linked with increased currency ISDs and that deficit disclosures tend to soften the risks in the foreign exchange market.

Analysis, Balance of trade

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Differences between foreign exchange rate regimes: The view from the tails

Article Abstract:

An extremal value analysis is proposed in comparing the empirical unconditional distribution function of foreign exchange rate returns for different exchange rate regimes. The more efficient nonparametric Hill estimator was used to determine the tail index for five different regimes. Results indicate all tail indexes in four regimes were in the same range and that tail indexes in one regime were significantly higher.

Models, Extreme value theory

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The re-emergence of PPP in the 1990s

Article Abstract:

There is substantial proof for purchasing power parity, though not to the same magnitude as for all currencies. Evidence supporting the purchasing power parity is most marked for numerous exchange rates in connection to the Dmark, and weakest for the Japanese yen. Under the methodology used, results are invariant to the selection of a standard on numeraire currency.

Foreign Currency Management, Research, Foreign exchange, Purchasing power

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