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REcent Exchange Rate Experience and Proposals for Reform

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  • Frankel, Jeffrey A.

Abstract

The paper reviews the grounds for fears that foreign exchange markets are not behaving as well as they should: recent misalignments and crises, and seven sets of academic findings. (1) Exchange rate volatility is high, (2) with possible adverse effects. (3) Volatility cannot be explained by observable fundamentals, (4) and changes when the regime changes, even without a change in volatility of fundamentals. (5) Expectations appear to be biased. (6) Short-term expectations are destabilizing. And (7) the effect of changes in monetary policy on the exchange rate is drawn out over time, and is not instantaneous.
(This abstract was borrowed from another version of this item.)
(This abstract was borrowed from another version of this item.)
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Frankel, Jeffrey A., 1996. "REcent Exchange Rate Experience and Proposals for Reform," Center for International and Development Economics Research, Working Paper Series qt62f2p0w1, Center for International and Development Economics Research, Institute for Business and Economic Research, UC Berkeley.
  • Handle: RePEc:cdl:ciders:qt62f2p0w1
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    References listed on IDEAS

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    1. Jeffrey A. Frankel, David Romer and Teresa Cyrus., 1995. "Trade and Growth in East Asian Countries: Cause and Effect?," Center for International and Development Economics Research (CIDER) Working Papers C95-050, University of California at Berkeley.
    2. Eichengreen, Barry & von Hagen, Jürgen, 1995. "Fiscal Policy and Monetary Union: Federalism, Fiscal Restrictions and the No-Bailout Rule," CEPR Discussion Papers 1247, C.E.P.R. Discussion Papers.
    3. Obstfeld, Maurice & Rogoff, Kenneth, 1995. "The intertemporal approach to the current account," Handbook of International Economics,in: G. M. Grossman & K. Rogoff (ed.), Handbook of International Economics, edition 1, volume 3, chapter 34, pages 1731-1799 Elsevier.
    4. James Tobin, 1978. "A Proposal for International Monetary Reform," Eastern Economic Journal, Eastern Economic Association, vol. 4(3-4), pages 153-159, Jul/Oct.
    5. Eichengreen, Barry & Simmons, Beth, 1993. "International Economics and Domestic Politics: Notes on the 1920s," Center for International and Development Economics Research (CIDER) Working Papers 233212, University of California-Berkeley, Department of Economics.
    6. Jeffrey A. Frankel., 1994. "The Internationalization of Equity Markets: Introduction," Center for International and Development Economics Research (CIDER) Working Papers C94-033, University of California at Berkeley.
    7. Tamim Bayoumi and Barry Eichengreen., 1993. "One Money or Many? On Analyzing the Prospects for Monetary Unification in Various Parts of the World," Center for International and Development Economics Research (CIDER) Working Papers C93-030, University of California at Berkeley.
    8. McKinnon, Ronald I, 1988. "Monetary and Exchange Rate Policies for International Financial Stability: A Proposal," Journal of Economic Perspectives, American Economic Association, vol. 2(1), pages 83-103, Winter.
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    Citations

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    Cited by:

    1. Cho, Guedae & Kim, MinKyoung & Koo, Won W., 2003. "Relative Agricultural Price Changes In Different Time Horizons," 2003 Annual meeting, July 27-30, Montreal, Canada 22249, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    2. Becchetti, L. & Ferrari, M. & Trenta, U., 2014. "The impact of the French Tobin tax," Journal of Financial Stability, Elsevier, vol. 15(C), pages 127-148.
    3. Frankel, J-A & Rose, A-K, 1996. "Economic Structure and the Decision to Adopt a Common Currency," Papers 611, Stockholm - International Economic Studies.
    4. Westerhoff, Frank H. & Dieci, Roberto, 2006. "The effectiveness of Keynes-Tobin transaction taxes when heterogeneous agents can trade in different markets: A behavioral finance approach," Journal of Economic Dynamics and Control, Elsevier, vol. 30(2), pages 293-322, February.
    5. Drabek, Zdenek & Brada, Josef C., 1998. "Exchange Rate Regimes and the Stability of Trade Policy in Transition Economies," Journal of Comparative Economics, Elsevier, vol. 26(4), pages 642-668, December.
    6. Evrensel, Ayse Y. & Kim, Jong Sung, 2006. "Macroeconomic policies and participation in IMF programs," Economic Systems, Elsevier, vol. 30(3), pages 264-281, October.
    7. Drama, Bedi Guy Herve, 2010. "The Effects of Real Exchange Rate on Trade Balance in Cote d’Ivoire: Evidence from the Cointegration Analysis and Error-Correction Models," MPRA Paper 21810, University Library of Munich, Germany.
    8. Cho, Guedae & Sheldon, Ian M. & McCorriston, Steve, 2000. "Exchange Rate Misalignment And Agricultural Trade," 2000 Annual meeting, July 30-August 2, Tampa, FL 21824, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    9. Pope, Robin & Selten, Reinhard & Kube, Sebastian & von Hagen, Jürgen, 2009. "Managed Floats to Damp Shocks like 1982-5 and 2006-9: Field and Laboratory Evidence for Chinese Interest in a Single World Currency," Bonn Econ Discussion Papers 26/2009, University of Bonn, Bonn Graduate School of Economics (BGSE).
    10. Lucjan T. Orlowski, 1996. "The Path of Exchange Rates in the Polish Economic Transformation," CASE Network Studies and Analyses 0090, CASE-Center for Social and Economic Research.

    More about this item

    Keywords

    exchange rate; foreign exchange market; volatility; speculation; bubble; McKinnon; Tobin tax; Social and Behavioral Sciences;

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions

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