Revisiting Exchange Rate Puzzles

9 Pages Posted: 6 Apr 2018

See all articles by Charles M. Engel

Charles M. Engel

University of Wisconsin - Madison - Department of Economics; National Bureau of Economic Research (NBER); University of Washington - Department of Economics

Feng Zhu

Bank for International Settlements (BIS)

Date Written: March 2018

Abstract

Engel and Zhu (2017) revisit a number of major exchange rate puzzles and conduct empirical tests to compare the behaviour of real exchange rates among pairs of economies that have rigidly fixed nominal exchange rates with their behaviour among pairs of economies under floating rates. They find that some of these puzzles become less puzzling for countries within the euro area, and regions in China and Canada, than for the non-euro-area OECD economies. Their results may have implications for exchange rate modelling.

Full Publication: The Price, Real and Financial Effects of Exchange Rates

Keywords: consumption correlation puzzle; excess volatility, exchange rate disconnect, exchange rate regime, real exchange rate, purchasing power parity, uncovered interest rate parity

JEL Classification: E43, F31

Suggested Citation

Engel, Charles M. and Zhu, Feng, Revisiting Exchange Rate Puzzles (March 2018). BIS Paper No. 96a. Available at SSRN: https://ssrn.com/abstract=3154023

Charles M. Engel (Contact Author)

University of Wisconsin - Madison - Department of Economics ( email )

1180 Observatory Drive
Madison, WI 53706
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608-262-3697 (Phone)
608-262-2033 (Fax)

National Bureau of Economic Research (NBER)

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Cambridge, MA 02138
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University of Washington - Department of Economics ( email )

Box 353330
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United States
206-543-6197 (Phone)
206-685-7477 (Fax)

Feng Zhu

Bank for International Settlements (BIS) ( email )

Centralbahnplatz 2
CH-4002 Basel
Switzerland
+41 61 280 9158 (Phone)
+41 61 280 9100 (Fax)

HOME PAGE: http://pantheon.yale.edu/~fz9

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