Exchange rate expectations and economic policy uncertainty

Beckmann, Joscha; Czudaj, Robert

doi:10.1016/j.ejpoleco.2016.06.003

Cited by 171 publications

(96 citation statements)

References 25 publications

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“…Reams of literature attempt to explain what drives exchange rates and, in turn, what exchange rate shifts may cause but it is clear that the exchange rate problem is complicate by many factors. Sarno and Schmeling [23] argued that macro-fundamentals like monetary and fiscal policy impact exchange rates while Beckmann and Czudaj said the difficulty in predicting rates brings monetary and fiscal policy uncertainty [24]. Sarno and Schmeling found that those exchange rates drove interest rates, inflation, money balances, and GDP.…”

Section: Literature Reviewmentioning

confidence: 99%

The Case for a Single Currency

Barbara¹,

Sandra²

2017

JAEF

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Abstract. Amidst the continued economic woes in the EU, lagging growth in China, the relative strengths and weaknesses of the dollar and other major currencies, and various and sundry articles about banker fraud, derivative-induced collapses, and general economic malaise, there lies an undercurrent of debate about a potential common monetary destiny: a single global currency. This paper evaluates eight currency candidates across the three roles of money and creates a typology of 70 nations using aggregate freedom scores from Freedom House and data from Bank for International Settlements (BIS) and the International Monetary Fund (IMF) to estimate banking system soundness. While some monetary units appear better suited for the monopoly role, none satisfies political criteria. Thirty-five nations scored well on total freedom and banking system stability and may serve as initial adopters if a currency candidate survives the political environment. Implementation concerns remain.Keywords: Global currency; currency; monetary reform; world currency The International Monetary System (IMS)The international monetary system is composed of exchange rate arrangements, capital flows and institutions, rules, and conventions governing the system's operations. Domestic policy generally falls into conformance [1]. Many argue that the international monetary system (IMS) is in desperate need of reform and that something must be done very soon to avoid catastrophe [1,2,3,4,5]. Alessandrini and Fratianni argue that the global instability derives from a deteriorating US dollar [6] and Subacchi called our system of volatile fiscal normalcy, "stable disequilibrium" [4, 668] presumably because it suffers from monstrous complexity, overextensions, burdensome debt and deficits, development here but poverty there, and central banks that have run out of ammunition to salve the world's economic wounds. Exchange rate and balance of payment imbalances, deflation in commodity demand, sudden currency devaluations, latent and patent wars, civil and religious conflicts, terrorism and fiscal imbalance, structural unemployment, and anti-austerity rallies [7] have prompted many to argue the time is right to move toward a single currency. But why would a single unit solve these problems? Exchange rate and balance of payments problems serve as a primary impetus for a single currency while others feel, for reasons of equity and cooperation, it is time to move away from a one currency reserve and create a new unit based on a basket of several existing, strong currencies. MethodologyThe shift to a single currency would represent a policy change of massive global proportions. Every nation, its businesses, every central bank, world bodies, retailers, households, and debt and pension fund holders would undergo huge recalculations in their budgets or portfolios. In the world of geopolitics, nothing is certain and, in modern times, since the modern world has never seen a global currency, there is no direct data by which to measure the success of one currency op...

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Section: Literature Reviewmentioning

confidence: 99%

The Case for a Single Currency

Barbara¹,

Sandra²

2017

JAEF

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“…Changes in the conditional variances of exogenous processes, such as future policies, potentially affect the risk premium in the foreign exchange market and also introduce volatility in spot rates (Hodrick, 1989). In the aftermath of the crisis, the impact of monetary policy uncertainty on expected and realized spot rates has attracted specific interest from researchers (Mueller et al, 2016;Beckmann and Czudaj, 2016).…”

Section: Literature Review: Exchange Rate Expectations and Uncertaintymentioning

confidence: 99%

“…5 See Beckmann and Czudaj (2016) for an analysis of disaggregated US policy uncertainty in a related context. 6 The newspapers included in the US index are USA Today, the Miami Herald, the Chicago Tribune, the Washington Post, the Los Angeles Times, the Boston Globe, the San Francisco Chronicle, the Dallas Morning News, the Houston Chronicle, and the Wall Street Journal.…”

Section: The Datamentioning

confidence: 99%

“…While US policy uncertainty has been analyzed in a related context (Beckmann and Czudaj, 2016), the availability of uncertainty measures for other economies allows for the possibility to assess the relative importance of policy uncertainty. Finally, the disagreement among CPI inflation forecasters represents an alternative measure of the unsystematic component.…”

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confidence: 99%

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The impact of uncertainty on professional exchange rate forecasts

Beckmann

Czudaj

2017

Journal of International Money and Finance

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in

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“…See, for instance, Boumparis, Milas, and Panagiotidis () for a recent analysis of policy uncertainty effects on sovereign credit ratings and the studies by Beckmann and Czudaj (, ) examining the role of several forms of uncertainty on exchange rate expectations and forecast errors. Another strand of literature proposed by Husted, Rogers, and Sun () focuses on a direct measure of monetary policy uncertainty.…”

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confidence: 99%

Monetary Policy Shocks, Expectations, and Information Rigidities

Beckmann

Czudaj

2018

Economic Inquiry

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This paper contributes to the literature by assessing expectation effects from monetary policy for G7 economies. We rely on expectation data from Consensus Economics and a panel vector autoregression framework, which accounts for international spillovers and time‐variation. We analyze whether monetary policy has changed the degree of information rigidity after the emergence of the subprime crisis and estimate effects of interest rate changes on expectations, disagreements, and forecast errors. We find strong evidence for information rigidities and identify higher forecast errors by professionals after monetary policy shocks. Our results suggest that the international transmission of monetary policy shocks introduces noisy information and partly increases disagreement among forecasters. (JEL E31, E52)

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Exchange rate expectations and economic policy uncertainty

Cited by 171 publications

References 25 publications

The Case for a Single Currency

The Case for a Single Currency

The impact of uncertainty on professional exchange rate forecasts

Monetary Policy Shocks, Expectations, and Information Rigidities

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