How Equilibrium Exchange Rate Misalignments Influence on Economic Growth? Evidence for European Countries

The determination of the equilibrium real exchange rate is one of the most important issues in open economy since the policymakers are concerned about predicting and monitoring misalignments and they are usually associated with current account problems and currency crises. To the best of my knowledge, this is the first time a study provides empirical evidence on the impact of deviations from the longrun sustainable real exchange rate equilibrium on real economic growth rate applying panel ARDLmodel (pooled mean group, mean group and dynamic fixed effect estimators) for the 27 European countries during the 2000?2016 period. This study applies the EQCHANGE database developed by Couharde et al. (2017) to obtain the real effective exchange rate (REER) misalignments according to the behavioral equilibrium exchange rate approach for each country. One of the main objectives is to determine the relationship between REER misalignments and economic growth trying to differentiate between short- and long-run effects. To this purpose, a neoclassical growthmodel is considered controlling for several economic variables such as gross capital formation, degree of openness, human capital, inflation rate, and population rate

The US Dollar-Euro exchange rate and US-EMU bond yield differentials: A Causality Analysis

This paper test for causality between the US Dollar-Euro exchange rate and US-EMU bond yield differentials. To that end, we apply Hsiao (1981)’s sequential procedure to daily data covering the 1999-2011 period. Our results suggest the existence of statistically significant Granger causality running one-way from bond yield differentials to the exchange rate, but not the other way around.Causality, Exchange rate, Long-term interest rates, Rolling regression

Innovations and ICT: do they favour economic growth and environmental quality?

In this paper, we examine whether innovation and information and communication technology (ICT) contribute to reducing producer prices, thus promoting economic growth. We also check whether the contributions of ICT enhance environmental quality, leading to sustainable economic growth. To this end, we apply panel data techniques to the 27 EU countries over the period of recovery from the financial crisis. Our results suggest that technological progress leads to a significant reduction in producer prices. Moreover, controlling for some macroeconomics factors, ICT fosters per capita economic growth in the European countries. Finally, we found that the higher the ICT employment is, the lower greenhouse gas emissions ar

Redefining monetary policy rules: A threshold approach

In this paper, we try to analyse the extent to which a redefinition of the monetary policy rule would help to avoid the zero-lower bound, as well as to explore the conditions needed to avoid that constraint. To that aim, we estimate the threshold values of the key variables of the policy rule: the inflation gap and the output gap. The threshold model allows us to know which are the turning points from which the relationship between the key variables and the interest rate revert. In the Eurozone countries, we have found that the inflation gap always contributes to increasing the nominal interest rate. On the contrary, the output gap works differently when it reaches values above or below the threshold value, which would favour the reduction of the interest rates towards the zero levelSpanish Ministry of Economy, Industry and Competitiveness through the project ECO2015-65826-

Factors determining exchange rate stability in member and candidate States of the European Union: An analysis based on genetic algorithms

En este trabajo se investiga cuáles son los principales factores determinantes que condicionan la probabilidad de que un país decida adoptar y mantener un sistema cambiario fijo de facto analizando 17 economías que forman parte de la Unión Europea. Como medida de robustez se consideran 3 alternativas de la variable objeto de estudio, al igual que se contrasta la sensibilidad de los resultados obtenidos ante diferentes procesos de formación de expectativas. A través de la metodología de algoritmos genéticos se examina un amplio conjunto de variables explicativas basadas en los modelos de primera, segunda, tercera y cuarta generación, añadiendo además variables de naturaleza política, de confianza, de expectativas e institucionales, con la finalidad de evaluar si mejora la capacidad explicativa de la estabilidad cambiaria. Entre los factores de mayor repercusión destaca claramente el grupo de las variables que miden la competitividad, tanto por su repetida presencia en los diferentes modelos como por su poder explicativo. Dentro de este grupo, muestra especial relevancia el tipo de cambio real, así como el índice de precios al consumo armonizado del país de referencia, que en nuestro caso se corresponde con la Zona Euro. Otras variables que destacan, pero en menor medida, son el agregado monetario M1, la paridad central, la confianza en las instituciones europeas, las expectativas de los agentes, la ideología parlamentaria y la libertad de los derechos políticos.In this work, a study is made on the main factors that can determine the possi-bility that a country decides to adopt and maintain a de facto fixed exchange rate system,by analysing the economies of 17 countries from the European Union. As a measure of robust-ness, three alternatives of study variable were considered, as well as contrasting the sensitivityof the results obtained using different forecasting models. Using this methodology of geneticalgorithms, a large group of explanatory variables is examined based on first, second, third,and fourth generation models. Added to these, were variables of a political nature, confidence,expectations, and institutional nature, with the aim of evaluating if it improves the explanatorycapacity of exchange rate stability. Among the higher impact factors, the group of variablesthat measure competiveness clearly stand out, due to their repeated presence in the diffe-rent models, as well as due to their predictive power. Within this group, true exchange rateshows special significance, as well the harmonised consumer price index of the country of refe-rence, which in our case is the Eurozone. Other variables highlighted but to a lesser extentare, the M1 monetary aggregate, central parity, the confidence in the European institutions,the expectations of the agents, parliamentary ideology, and the freedom of political right

Ensayos sobre macroeconomía internacional

Tesis inédita de la Universidad Complutense de Madrid, Facultad de Ciencias Económicas y Empresariales, Departamento de Fudamentos del Análisis Económico II (Economía Cuantitativa), leída el 23-06-2014Depto. de Análisis Económico y Economía CuantitativaFac. de Ciencias Económicas y EmpresarialesTRUEunpu

El tipo de cambio dólar estadounidense‑euro y el diferencial del rendimiento de los bonos entre EE. UU. y la Zona Euro: Un análisis de causalidad

This paper tests for causality between the US dollar‑euro exchange rate and US‑EMU bond yield differentials. To that end, we apply Hsiao’s (1981) sequential procedure to daily data covering the 1999‑2011 period. Our results suggest the existence of statistically significant Granger causality running one‑way from bond yield differentials to the exchange rate, but not the other way round. The results do not change when using short‑term interest rate differentials or when we examine the Japanese yen‑euro exchange rate. Nevertheless, we detect bi‑directional Granger causality between the pound sterling‑euro exchange rate and the short‑term interest rate differential between UK and EMUEste trabajo realiza un contraste de causalidad entre el tipo de cambio dólar estadounidense‑euro y el diferencial de rendimiento de los bonos entre Estados Unidos y la Zona Euro. Para ello, se aplica el procedimiento secuencial de Hsiao (1981) a datos diarios para el período 1999‑2011. Nuestros resultados sugieren la existencia de causalidad en el sentido de Granger estadísticamente significativa desde el diferencial de rendimiento de los bonos hacia el tipo de cambio, pero no a la inversa. Los resultados no cambian cuando se usan diferenciales de tipos de interés a corto plazo o cuando se analiza el tipo de cambio yen japonés‑euro, sin embargo, detectamos causalidad bidireccional de Granger entre el tipo de cambio libra esterlina‑euro y el diferencial del tipo de interés a corto plazo entre el Reino Unido y la Zona EuroWe are also grateful for the financial support from the Spanish Ministry of Science and Innovation (ECO2011-23189). María del Carmen Ramos‑Herrera also acknowledges her grant (F.P.U.) from the Spanish Ministry of Science and Innovation (Ref. AP2008‑004015

Headline and Core Inflation: An Empirical Analysis Based on the ECB Survey of Professional Forecasters

Quantifying individual expectations has become a very important topic in economics, both for academic researchers and policymakers. One of the most relevant advantages of collecting probabilistic expectations is that the quantitative answers can be used to compare predictions across different agents and time, as well as to analyse their consistency. The Survey of Professional Forecasters (SPF) conducted by the European Central Bank (ECB) offers expectations about real economic growth, inflation and unemployment rates. In this case, we focus on point and probability distribution forecasts for headline and core inflation rates. Since 1999, this SPF has been conducted quarterly. This survey collects responses from financial and other institutions from around the European Union. It is usually based on approximately 75 professional forecasters with an average of 60 respondents for each round. It is subject to revisions during the survey, adapting to different circumstances. These panellists usually update their forecasts following data releases or other events (such as the financial crisis) and some of them may also update because of significant shocks

Detection of implicit fluctuation bands and their credibility in EU candidate countries

This paper attempts to identify implicit exchange-rate regimes for currencies of candidate countries vis-à-vis the euro. To that end, we apply three sequential procedures that consider the dynamics of exchange rates to data covering the period from 1999:01 to 2012:12. Our results would suggest that implicit bands have existed in many sub-periods for almost all currencies under study. Once we detect de facto discrepancies between de facto and de iure exchange-rate regimes, we make use of different methods to study the credibility of the detected fluctuation bands. The detected lack of credibility in a high percentage of the sample is robust to the use of several credibility tests, suggesting that economic agents do not behave as if these bands actually were in force at time of making their financial plans. These countries do not improve the confidence on the fluctuation bands as time evolves