Exchange Rate Volatility and Output Volatility: a Theoretical Approach
This paper makes an attempt to determine the factors influencing exchange rate and exchange rate uncertainty, as well as, output and output variability. In the context of a small open economy under flexible exchange rates regime it is found that the level both of exchange rate and output is affected by monetary and inflationary shocks, as well as shocks in government spending, output and trade balance. Further, the uncertainty of exchange rate and output is associated positively with the uncertainty of all shocks while the contemporaneous occurrence of selected shocks imposes either a positive or negative impact on exchange rate and output volatility. Finally, it is shown that the effect of the determinants either of exchange rate volatility or output volatility is very sensitive to the parameter values.
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.:
- Stilianos Fountas & Menelaos Karanasos & Alfonso Mendoza, 2004. "Output Variability and Economic Growth: the Japanese Case," Bulletin of Economic Research, Wiley Blackwell, vol. 56(4), pages 353-363, October.
- Jean Imbs, 2006.
"Growth and Volatility,"
Swiss Finance Institute Research Paper Series
06-09, Swiss Finance Institute.
- Maurice Obstfeld & Kenneth S. Rogoff, 1996. "Foundations of International Macroeconomics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262150476, June.
- Obstfeld, Maurice & Rogoff, Kenneth, 1995.
"Exchange Rate Dynamics Redux,"
Journal of Political Economy,
University of Chicago Press, vol. 103(3), pages 624-60, June.
- Obstfeld, Maurice & Rogoff, Kenneth S., 1995. "Exchange Rate Dynamics Redux," Scholarly Articles 12491026, Harvard University Department of Economics.
- Maurice Obstfeld and Kenneth Rogoff., 1995. "Exchange Rate Dynamics Redux," Center for International and Development Economics Research (CIDER) Working Papers C95-048, University of California at Berkeley.
- Obstfeld, Maurice & Rogoff, Kenneth, 1995. "Exchange Rate Dynamics Redux," CEPR Discussion Papers 1131, C.E.P.R. Discussion Papers.
- Maurice Obstfeld & Kenneth Rogoff, 1994. "Exchange Rate Dynamics Redux," NBER Working Papers 4693, National Bureau of Economic Research, Inc.
- Fountas, Stilianos & Karanasos,Menelaos, 2001.
"Inflation and Output Growth Uncertainty and their Relationship with Inflation and Output Growth,"
0053, National University of Ireland Galway, Department of Economics, revised 2001.
- Fountas, Stilianos & Karanasos, Menelaos & Kim, Jinki, 2002. "Inflation and output growth uncertainty and their relationship with inflation and output growth," Economics Letters, Elsevier, vol. 75(3), pages 293-301, May.
- Manuelli, Rodolfo E & Peck, James, 1990. "Exchange Rate Volatility in an Equilibrium Asset Pricing Model," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 31(3), pages 559-74, August.
- Karras, Georgios, 2006. "Trade Openness, Economic Size, and Macroeconomic Volatility: Theory and Empirical Evidence," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 21, pages 254-272.
- Driskill, Robert & McCafferty, Stephen, 1980. "Exchange-Rate Variability, Real and Monetary Shocks, and the Degree of Capital Mobility under Rational Expectations," The Quarterly Journal of Economics, MIT Press, vol. 95(3), pages 577-86, November.
- Fatas, Antonio & Mihov, Ilian, 2006.
"The macroeconomic effects of fiscal rules in the US states,"
Journal of Public Economics,
Elsevier, vol. 90(1-2), pages 101-117, January.
- Fatás, Antonio & Mihov, Ilian, 2004. "The Macroeconomic Effects of Fiscal Rules in the US States," CEPR Discussion Papers 4372, C.E.P.R. Discussion Papers.
- Davide Furceri, 2007. "Is Government Expenditure Volatility Harmful for Growth? A Cross-Country Analysis," Fiscal Studies, Institute for Fiscal Studies, vol. 28(1), pages 103-120, 03.
- Caporale, Tony & McKiernan, Barbara, 1996. "The Relationship between Output Variability and Growth: Evidence from Post War UK Data," Scottish Journal of Political Economy, Scottish Economic Society, vol. 43(2), pages 229-36, May.
- Ramey, Garey & Ramey, Valerie A, 1995.
"Cross-Country Evidence on the Link between Volatility and Growth,"
American Economic Review,
American Economic Association, vol. 85(5), pages 1138-51, December.
- Garey Ramey & Valerie A. Ramey, 1994. "Cross-Country Evidence on the Link Between Volatility and Growth," NBER Working Papers 4959, National Bureau of Economic Research, Inc.
- Speight, Alan E H, 1999. "UK Output Variability and Growth: Some Further Evidence," Scottish Journal of Political Economy, Scottish Economic Society, vol. 46(2), pages 175-84, May.
- Driskill, Robert & McCafferty, Stephen, 1987. "Exchange-rate determination: An equilibrium approach with imperfect capital substitutability," Journal of International Economics, Elsevier, vol. 23(3-4), pages 241-261, November.
- Turnovsky, Stephen J & Bhandari, Jagdeep S, 1982. "The Degree of Capital Mobility and the Stability of an Open Economy under Rational Expectations," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 14(3), pages 303-26, August.
- Kevin B. Grier & Mark J. Perry, 2000. "The effects of real and nominal uncertainty on inflation and output growth: some garch-m evidence," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 15(1), pages 45-58.
- Davide Fiaschi & Andrea Mario Lavezzi, . "On the Determinants of Growth Volatility: a Nonparametric Approach," Discussion Papers 2003/25, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
- Antonio Fatás & Ilian Mihov, 2003.
"The Case For Restricting Fiscal Policy Discretion,"
The Quarterly Journal of Economics,
MIT Press, vol. 118(4), pages 1419-1447, November.
- Betts, Caroline & Devereux, Michael B., 1996. "The exchange rate in a model of pricing-to-market," European Economic Review, Elsevier, vol. 40(3-5), pages 1007-1021, April.
When requesting a correction, please mention this item's handle: RePEc:mcd:mcddps:2008_16. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Theodore Panagiotidis)
If references are entirely missing, you can add them using this form.