Our main findings indicate that episodes of exchange rate appreciation preceded expectations of further appreciation in the short run, but were marked by depreciations in the long run.
Our findings indicate that episodes of exchange rate appreciation preceded expectations of further appreciation in the short run, but were marked by depreciations in the long run.
As observed, episodes of exchange rate appreciation were generally followed by expectations of further appreciation in the short run, and by expectations of depreciation (reversals) in the long run.
"Given extensive intervention combined with excessive liquidity, real exchange rate appreciation and economic overheating could follow.
Yet that growth rate is primarily due to the success of non-tradeables such as construction, which are barely affected by exchange rate appreciation.
The International Monetary Fund, meanwhile, said Thursday that many Asian nations needed to tighten monetary policy further, including through greater exchange rate appreciation.
Given that American consumer price inflation is well below that, real exchange rate appreciation has occurred far faster over the past year than has nominal exchange rate appreciation.Mr Chinn provides some nice analysis of this trend.
Well, as Menzie Chinn notes here, there has been a substantial amount of real exchange rate appreciation against the dollar, and this appears to be having some effect on China's trade balance.
The figures suggest that real exchange rate appreciation is having an effect, but one also suspects that structural shifts—higher saving in America and busier consumers in China are also pushing economies toward balance.
Second, pro-cyclical spending of highly volatile oil revenues results in a series of negative macroeconomic consequences ranging from soaring inflation, exchange rate appreciation, and a further accentuation of the crowding-out of private investments.
