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This paper studies the implications of the imperfect credibility of an exchange rate target zone on the term structure of forward premia. The relationship between spot and forward exchange rates of different maturities reflects the possibility of repeated realignments of the exchange rate band. The credibility of the commitment to the target zone implicit in forward market data can be extracted by estimating the model. Application to French/German data indicates that the model is capable of matching observed patterns of interest rate differentials during the EMS, while yielding estimates of the credibility parameters that accord with the experience of the FF/DM exchange rate during the 1980s.

Crawling peg --- Currency --- Exchange rates --- Foreign Exchange --- Foreign exchange --- Forward exchange rates --- International Financial Markets --- International Monetary Arrangements and Institutions --- Managed exchange rates --- Spot exchange rates --- Germany

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The random walk property of exchange rates is frequently regarded as carrying strong implications for the kinds of shocks that have driven exchange rates and the models appropriate for analyzing their behavior. This paper conducts stochastic simulations of Dornbusch’s (1976) sticky-price monetary model, calibrated for representative parameter values for the United States. It shows that the model is capable of generating time series for both real and nominal exchange rates that are statistically indistinguishable from random walks when all shocks are nominal.

Foreign Exchange --- Money and Monetary Policy --- Monetary Policy, Central Banking, and the Supply of Money and Credit: General --- Currency --- Foreign exchange --- Monetary economics --- Real exchange rates --- Exchange rates --- Monetary base --- Forward exchange rates --- Purchasing power parity --- Money --- Spot exchange rates --- Money supply --- United States

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This paper provides an overview of the uncovered interest parity assumption. It traces the history of the interest parity concept, summarizes evidence on the empirical validity of uncovered interest parity, and discusses different interpretations of the evidence and the implications for macroeconomic analysis. The uncovered interest parity assumption has been an important building block in multiperiod models of open economies, and although its validity is strongly challenged by the empirical evidence, at least at short time horizons, its retention in macroeconomic models is supported on pragmatic grounds by the lack of much empirical support for existing models of the exchange risk premium.

Banks and Banking --- Foreign Exchange --- Money and Monetary Policy --- Interest Rates: Determination, Term Structure, and Effects --- Monetary Systems --- Standards --- Regimes --- Government and the Monetary System --- Payment Systems --- Currency --- Foreign exchange --- Finance --- Monetary economics --- Interest rate parity --- Spot exchange rates --- Exchange rates --- Currencies --- Forward exchange rates --- Interest rates --- Money --- United Kingdom

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Evidence from the past three years indicates that the exchange rate between the private ECU and the official ECU Basket can deviate substantially from par. The value of the private ECU is driven by expectations that a future European Central Bank will enforce par convertibility between the private ECU and the official ECU basket of currencies. Meanwhile, no existing institutional arrangement limits the private ECU’s value in terms of the Basket. This paper addresses the question of what determines the values of the private ECU and of private ECU interest rates. We show that an anticipation of a future fixing of the private ECU’s value, together with the interest rate setting mechanism of the large-value ECU payment and clearing system, are sufficient to determine its value. The determination of the private ECU exchange rate provides the template for how to determine the value of any private composite currency, such as, for example, a private SDR.

Banking --- Banks and Banking --- Banks and banking --- Banks --- Central Banks and Their Policies --- Currencies --- Currency markets --- Currency --- Depository Institutions --- Derivative securities --- Exchange rates --- Finance --- Finance: General --- Financial institutions --- Financial Instruments --- Financial markets --- Foreign exchange market --- Foreign Exchange --- Foreign exchange --- Futures --- Government and the Monetary System --- Institutional Investors --- Interest Rates: Determination, Term Structure, and Effects --- International Financial Markets --- Investments: Futures --- Micro Finance Institutions --- Monetary economics --- Monetary Systems --- Money and Monetary Policy --- Money --- Mortgages --- Non-bank Financial Institutions --- Payment Systems --- Pension Funds --- Regimes --- Spot exchange rates --- Standards --- Belgium

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The COVID-19 pandemic underscores the critical need for detailed, timely information on its evolving economic impacts, particularly for Sub-Saharan Africa (SSA) where data availability and lack of generalizable nowcasting methodologies limit efforts for coordinated policy responses. This paper presents a suite of high frequency and granular country-level indicator tools that can be used to nowcast GDP and track changes in economic activity for countries in SSA. We make two main contributions: (1) demonstration of the predictive power of alternative data variables such as Google search trends and mobile payments, and (2) implementation of two types of modelling methodologies, machine learning and parametric factor models, that have flexibility to incorporate mixed-frequency data variables. We present nowcast results for 2019Q4 and 2020Q1 GDP for Kenya, Nigeria, South Africa, Uganda, and Ghana, and argue that our factor model methodology can be generalized to nowcast and forecast GDP for other SSA countries with limited data availability and shorter timeframes.

South Africa --- Macroeconomics --- Economics: General --- International Economics --- Econometrics --- Intelligence (AI) & Semantics --- Foreign Exchange --- Industries: Financial Services --- Informal Economy --- Underground Econom --- Classification Methods --- Cluster Analysis --- Principal Components --- Factor Models --- Technological Change: Choices and Consequences --- Diffusion Processes --- Time-Series Models --- Dynamic Quantile Regressions --- Dynamic Treatment Effect Models --- State Space Models --- Monetary Systems --- Standards --- Regimes --- Government and the Monetary System --- Payment Systems --- Economic & financial crises & disasters --- Economics of specific sectors --- Econometrics & economic statistics --- Machine learning --- Currency --- Foreign exchange --- Computer applications in industry & technology --- Factor models --- Econometric analysis --- Technology --- Time series analysis --- Spot exchange rates --- Mobile banking --- Currency crises --- Informal sector --- Economics --- Econometric models --- Banks and banking, Mobile