Exchange Rates and Macroeconomics Dynamics Book

List of Tables     ix
List of Figures     x
Notes on the Contributors     xi
Introduction     1
The Purchasing Power Parity and its Implications for Equilibrium Exchanges Rates
Three Exchange Rate Puzzles: Fact or Fiction?   Ronald MacDonald     9
Introduction     9
The PPP puzzle     10
Testing PPP     14
Econometric explanations for the PPP puzzle     23
The volatility puzzle     32
The forward-looking monetary relationship and the magnification effect     33
Empirical evidence on inter- and intra-regime volatility     44
The levels puzzle and out-of-sample forecasting     46
Summary and conclusions     53
The Real Exchange Rate Misalignment in the Five Central European Countries - Single Equation Approach   Jan Frait   Lubos Komarek   Martin Melecky     61
Introduction     61
Development and determinants of the real exchange rates     63
The real exchange rate developments in the new EU Member States     63
The fundamental factors affecting the real exchange rate     67
The equilibrium real exchange rate concepts     68
Methods based on an economic theory     69
Outline of the behavioural model for EU5 countries     70
Empirical evaluation and evidence for the EU5 countries     72
Empirical techniques     72
Misalignments of the EU5 countries' currencies     78
Conclusion     81
Real Equilibrium Exchange Rate in China. Is the Renminbi Undervalued?   Virginie Coudert   Cecile Couharde     94
Introduction     94
Is the renminbi undervalued? The 'usual suspects'     95
Estimating the Balassa effect     98
The Balassa effect     98
Cross-section estimations     100
Panel data estimations     103
Discussion     107
Why is there no Balassa effect at work in China?     107
Comparisons with previous results     108
Conclusion     110
Exchange Rates Dynamics and Pass-Through Effects
Exchange Rate Pass-Through Effect and Monetary Policy in Russia   Victoria V. Dobrynskaya   Dmitry V. Levando     115
Introduction     115
Literature review     118
Theories of exchange rate PTE     118
Empirical evidence     119
Influence of monetary policy on PTE     121
Theoretical model      121
Empirical analysis     123
Data     123
Methodology and results     125
Influence of monetary policy on PTE     132
Conclusion     135
Disaggregated Econometric Models to Forecast Inflation in Hungary   Viktor Varpalotai     139
Introduction     139
Inflation forecasting models used by the MNB     140
The disaggregated cost pass-through based inflation forecasting model     142
Framework of the model     142
Econometric issues: Distributed lag estimator derived from smoothness priors     149
Empirical results and the predictive accuracy of the model     150
Conclusions     153
Exchange Rates Dynamics and Structural Shocks on Economies
An Open Economy Dynamic General Equilibrium Model Linking the Euro Area and the US Economy   Gregory de Walque   Raf Wouters     169
Introduction     169
Model description     172
Households     172
The firms and price setting     176
Balance of payments     182
Market equilibrium     182
The US economy and the rest of the world     183
The monetary policy     184
Structural shocks summary     184
Data and estimation     185
Impulse response functions for the shocks     191
Productivity shocks     191
Domestic demand shocks     201
Monetary policy shocks     201
Oil shocks     204
Uncovered interest rate parity shock to the exchange rate     209
ROW shocks     209
Model validation by summary statistics     210
The unconditional variance decomposition of the forecast errors     214
Conclusion     223
Liberalisation Shocks and Real Exchange Rates Appreciation in the Transition Economies   Christos Papazoglou     227
Introduction     227
The model     229
The general solution of the system     233
Increase in core inflation     235
Decrease in the demand for money     237
Conclusions     239
Index     243