Exchange rate volatility and domestic consumption: Evidence from Japan
AbstractIn 1952, Alexander provided an argument that since inflationary effects of depreciation could shift income from workers to producers it could lead to a decline in aggregate domestic consumption. This was based on the assumption that wages do not adjust fully to inflation and labor has a high MPC relative to that of the producers. In this paper, we argue that in addition to the exchange rate itself, exchange rate uncertainty could also affect domestic consumption. We demonstrate our conjecture by using quarterly data from Japan and a bounds testing approach that distinguishes the short run from the long run.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Elsevier in its journal Economic Systems.
Volume (Year): 36 (2012)
Issue (Month): 2 ()
Contact details of provider:
Postal: Landshuter Str. 4, 93047 Regensburg
Phone: +49-(0)941-943 54 10
Fax: +49-(0)941-943 54 27
Web page: http://www.elsevier.com/locate/inca/621171
More information through EDIRC
Aggregate consumption; Exchange rate uncertainty; Japan;
Find related papers by JEL classification:
- E21 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
- F31 - International Economics - - International Finance - - - Foreign Exchange
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Hassan Mohammadi & Murat Cak & Demet Cak, 2008. "Wagner's hypothesis: New evidence from Turkey using the bounds testing approach," Journal of Economic Studies, Emerald Group Publishing, vol. 35(1), pages 94-106, March.
- Ferda Halicioglu, 2007. "The J-curve dynamics of Turkish bilateral trade: a cointegration approach," Journal of Economic Studies, Emerald Group Publishing, vol. 34(2), pages 103-119, May.
- Kugler, Peter, 1985. "Autoregressive Modelling of Consumption, Income, Inflation, and Interest Rate Data: A Multicountry Study," Empirical Economics, Springer, vol. 1(1), pages 37-50.
- John Y. Campbell & N. Gregory Mankiw, 1989.
"Consumption, Income and Interest Rates: Reinterpreting the Time Series Evidence,"
in: NBER Macroeconomics Annual 1989, Volume 4, pages 185-246
National Bureau of Economic Research, Inc.
- John Y. Campbell & N. Gregory Mankiw, 1990. "Consumption, Income, and Interest Rates: Reinterpreting the Time Series Evidence," NBER Working Papers 2924, National Bureau of Economic Research, Inc.
- Mohsen Bahmani-Oskooee & Claire Economidou & Gour Gobinda Goswami, 2005. "How sensitive are Britain's inpayments and outpayments to the value of the British pound," Journal of Economic Studies, Emerald Group Publishing, vol. 32(5), pages 455-467, October.
- James E. Payne, 2008. "Inflation and inflation uncertainty: evidence from the Caribbean region," Journal of Economic Studies, Emerald Group Publishing, vol. 35(6), pages 501-511, November.
- Koi Nyen Wong & Tuck Cheong Tang, 2008. "The effects of exchange rate variability on Malaysia's disaggregated electrical exports," Journal of Economic Studies, Emerald Group Publishing, vol. 35(2), pages 154-169, May.
- Bahmani-Oskooee, Mohsen & Tankui, Altin, 2008. "The black market exchange rate vs. the official rate in testing PPP: Which rate fosters the adjustment process?," Economics Letters, Elsevier, vol. 99(1), pages 40-43, April.
- Mohsen Bahmani-Oskooee & Abera Gelan, 2009. "How stable is the demand for money in African countries?," Journal of Economic Studies, Emerald Group Publishing, vol. 36(3), pages 216-235, September.
- Paresh Kumar Narayan & Seema Narayan & Biman Chand Prasad & Arti Prasad, 2007. "Export-led growth hypothesis: evidence from Papua New Guinea and Fiji," Journal of Economic Studies, Emerald Group Publishing, vol. 34(4), pages 341-351, September.
- Bahmani-Oskooee, Mohsen, 1991. "Effects of exchange rate variability on inflation variability," World Development, Elsevier, vol. 19(6), pages 729-733, June.
- M. Hashem Pesaran & Yongcheol Shin & Richard J. Smith, 2001. "Bounds testing approaches to the analysis of level relationships," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(3), pages 289-326.
- Robert E. Hall, 1986.
"The Role of Consumption in Economic Fluctuations,"
NBER Working Papers
1391, National Bureau of Economic Research, Inc.
- repec:fth:harver:1435 is not listed on IDEAS
- Dalia Hakura & Ehsan U. Choudhri, 2001.
"Exchange Rate Pass-Through to Domestic Prices: Does the Inflationary Environment Matter?,"
IMF Working Papers
01/194, International Monetary Fund.
- Choudhri, Ehsan U. & Hakura, Dalia S., 2006. "Exchange rate pass-through to domestic prices: Does the inflationary environment matter?," Journal of International Money and Finance, Elsevier, vol. 25(4), pages 614-639, June.
- Mohsen Bahmani-Oskooee & Scott W. Hegerty, 2007. "Exchange rate volatility and trade flows: a review article," Journal of Economic Studies, Emerald Group Publishing, vol. 34(3), pages 211-255, September.
- Tuck Cheong Tang, 2007. "Money demand function for Southeast Asian countries: An empirical view from expenditure components," Journal of Economic Studies, Emerald Group Publishing, vol. 34(6), pages 476-496, November.
- Alan S. Blinder & Angus Deaton, 1985. "The Time Series Consumption Function Revisited," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 16(2), pages 465-521.
- Mohsen Bahmani-Oskooee & Massomeh Hajilee, 2010. "On the relation between currency depreciation and wages," Applied Economics Letters, Taylor and Francis Journals, vol. 17(6), pages 525-530.
- Sidney S. Alexander, 1952. "Effects of a Devaluation on a Trade Balance," IMF Staff Papers, Palgrave Macmillan, vol. 2(2), pages 263-278, April.
- Hall, Stephen G & Psaradakis, Zacharias & Sola, Martin, 1997. "Cointegration and Changes in Regime: The Japanese Consumption Function," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 12(2), pages 151-68, March-Apr.
- Glauco De Vita & Khine S. Kyaw, 2008. "Determinants of capital flows to developing countries: a structural VAR analysis," Journal of Economic Studies, Emerald Group Publishing, vol. 35(4), pages 304-322, July.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wendy Shamier).
If references are entirely missing, you can add them using this form.