This paper investigates the factors driving the real exchange rate in the Ghanaian economy. The paper aimed at finding the principal factor(s) that influence the real exchange rate and explains the channels by which these factors exert their influence using standard empirical methods of vector autoregressive (VAR) models. The paper established that inflation rate differentials and interest rate differentials influence the exchange rate through the expectations medium. Domestic and foreign money supplies which are exogenous macroeconomic variables were also found to be important in the Ghanaian money market as far as the exchange rate matters. The paper also highlighted how the great recession in the United States may have affected the cedi/dollar rate of exchange after this economic event swept through the United States generating spillover effects on economies around the world.

Expectations regarding the relationship between exchange rates and the prices of traded goOds in small open economies have traditionally been derived from the idea of the relative unimportance of a single small country when trading in much larger international markets. This concept has led to the use of distinct 'small-country' or 'dependent-economy' models to analyse the effects of macroeconomic changes. Thus for small economies like Australia, it is usually assumed that the foreign-currency prices of traded goods are fixed in perfectly competitive international markets. Accordingly, exchange rate movements must be completely absorbed in domestic-currency prices. In other words, the pass-through of exchange rate changes to destination-currency prices must be zero for Australian exports, and complete for Australian imports. Such expectations regarding the degree of exchange rate pass-through contrast sharply with those found in conventional macroeconomic models for large countries, in which pass-through is assumed to be complete for all traded goods. Moreover, they conflict with the results derived from the large theoretical and empirical literature on the microeconomic determinants of pass-through, which suggests that much international trade takes place in imperfectly competitive markets, in which the degree of less-than-complete pass-through depends on industry-specific factors. This study explores these apparent conflicts by re-examining the small-country assumption, with particular emphasis on export prices as the area of greatest divergence. Specifically, it addresses three research questions: 1) What are the theoretical conditions that underlie the small-country assumption? 2)What are the implications for the macroeconomic models of small economies if this assumption is violated? 3) In practice, is the data more consistent with the validity or otherwise of the assumption? The analysis focuses on Australia as a practical example of a small open economy with a high proportion of commodity exports. In summary, the theoretical and empirical results reported in this study suggest that the small-country assumption is unlikely to hold in practice. That is, exchange rate pass-through is more likely to be determined by industry-specific factors, rather than by the universal conclusion of zero pass-through for all Australian exports that is derived from the small-country assumption. Further, they imply that the movement in internal prices required to restore equilibrium in a small country following an external shock is likely to be both larger and more uncertain than has previously been expected. Under such circumstances, the full flexibility of the exchange rate, as the primary and most rapid source of the required adjustments, becomes particularly significant. An important policy implication for small open economies that are subject to frequent terms of trade shocks, such as Australia, is that attempts to manage the exchange rate in order to reduce apparently excessive movements may in fact result in a longer and more protracted process of adjustment through the labour market.

The use of currency options has been grown widely during the latest years. This paper tries to answer whether hedge strategies using currency options are superior to forward exchange contracts or not.

The purpose of this research paper is to find how much risk is involved in investing emerging market debt. Emerging markets are becoming a hub for foreign investors either that is an equity or debt investment. The risk is the important element for investors. As for emerging markets the most important risk that investor can face is exchange rate and political risk. I used Augmented Dickey-Fuller to carry out unit roots and johansen cointegration analysis of exchange rates and political risk in emerging markets. My result shows that individual variables are integrated order one, means unit root exist. This shows that political risk tends to follow a random walk. My finding suggests that there is a long run relationship between political risk and exchange rate. As the political risk increase exchange rate also fluctuate with relation to political situation.

The purpose of this thesis is to examine whether the exchange rate volatility has an impact on Swedish exports. This relationship has been tested in several studies but no consistent result has been found. It is therefore an interesting subject to investigate further and it has not been thoroughly tested for Sweden using aggregated data. Since the exchange rate vola-tility may have an effect on exports, and therefore on the whole economy, the effect can support a certain exchange rate regime. All the data used in this thesis is based on the ag-gregated data for Sweden and the Euro zone between the years 1993 and 2006. The method chosen is a statistical analysis using regressions. Three variables other than ex-change rate volatility were included when conducting the regressions explaining Swedish exports and these are: the real effective exchange rate index, the industrial production in Sweden (“push” factor) and the import from the Euro Zone (“pull” factor). The overall conclusion found was that the industrial production in Sweden, the real effective exchange rate index, the time and lagged values of the export influence the export. There was no evi-dence found that the exchange rate volatility influences the exports for Sweden.

This dissertation consists of three independent essays in Macroeconomics. The first essay analyzes monetary coordination between currency areas. It is shown that search frictions can generate the deviations from the law of one price and that each country is tempted to exploit these deviations by inflation. Monetary coordination eliminates the inefficiency caused by inflation. The welfare gains from coordination increase when the two economies become more integrated. In contrast to traditional models, the need for coordination exists even after each country is allowed to directly tax foreign holdings of its currency. The second essay studies the behavior of exchange rates in an environment with search frictions. In contrast to traditional models, even without any nominal rigidity, the model can generate enough volatility of exchange rates found in the data. The changes in the behavior of exchange rates under different regimes are also examined in this essay. The model shows a sharp increase in the volatility of exchange rates when moving from a pegged to a floating exchange regime, while there is no such systematic change in fluctuations of output or consumption. Moreover, the co-movements of output and consumption across countries are higher under a fixed rate regime than under a flexible rate regime. These results are consistent with empirical findings. The final essay focuses on the competition between groups of allied firms. In the essay we propose a model of group fitness and develop an approach to evaluate the fitness of groups and the utility of their member firms. A group has high fitness if member firms have four features: (i) high capacity, (ii) being embedded in dense relationships, (iii) holding complementary resources and (iv) having limited competition and conflict. We illustrate the effectiveness of our model and methodology by applying it to the airline groups between 1997 and 2002. By examining what really happened to the airline groups afterwards, we found that the predictions based on the comparison between the fitness scores of actual groups formed and those of the corresponding population constructed are reasonably accurate, and that the implications based on the ranking of individual firm utility within each group are generally supported.

Using the error correction model, we link the long-run behavior of the Canada-US real exchange rate to its short-run dynamics. The equilibrium real exchange rate is determined by the energy and non-energy commodity prices over the period 1973Q1-1992Q1. However such a single long-run relationship does not hold when the sample period is extended to 2004Q4. This breakdown can be explained by the break point which we find at 1993Q3. At the break point, the effect of the energy price shocks on Canadas real exchange rate turns from negative to positive while the effect of the non-energy commodity price shocks is constantly positive. We find that after one year 40.03% of the gap between the actual and equilibrium real exchange rate is closed. The Canada-US interest rate differential affects the real exchange rate temporarily. The Canadas real exchange rate depreciates immediately after a decrease in Canadas interest rate and appreciates next quarter but not by as much as it has depreciated.

The dissertation consists of three essays on Dutch Disease and exchange rate pass-through. Dutch Disease refers to the adverse effects of the natural resource booms on the tradable sectors (manufacturing industries) which may occur mainly through the subsequent appreciation of the real exchange rate.<p> The first essay aims to investigate whether Canadian manufacturing industries have experienced Dutch Disease over the period 1992-2007 as a result of the oil boom. After a review of the literature and discussion of the theoretical considerations, the paper presents a two part empirical analysis to estimate the short- and long-run Dutch Disease effects for the Canadian manufacturing industries at three, four and few cases of five-digit levels of NAICS (about 80 industries), using quarterly data. The first part of the empirical analysis estimates the relationship between real exchange rate and energy prices as well as the other related factors and the second part estimates the effect of real exchange rate on output of the manufacturing industries. Based on these two estimated relationships, the Dutch Disease effect is derived by calculating the effect of energy prices on output of the manufacturing industries. The results indicate that the direction and magnitude of the Dutch Disease effect varies substantially across industries likely, as theory explains, because of differences in market structure in terms of the market power. Specifically, 53 out of the 80 industries suffer from the Dutch Disease with the elasticity of -0.18 in average, while Dutch Disease is beneficial for 24 industries with the elasticity of 0.21 in average. The simulation results reveal that, among the industries suffering (benefiting) from the Dutch Disease, each industry could have more annual output growth by 0.93 (-1.07) percent in average if energy prices remained at its level in 1992. This simulated value for the whole sample is 0.30 percent which is significant compared to 2.8 percent as the average of annual industrial production growth during 1992-2007.<p> The second and third essays together aim to model and estimate the degree of exchange rate pass-through into Canadian producer prices in manufacturing industries. The second essay, as a theoretical one, presents a literature review and contributes to the literature by developing a relatively more general theoretical framework. The provided model, which extends Yangs model (1997) by incorporating the role of the tradable inputs, is able to show all the major determinants of exchange rate pass-through together, while the previous studies have only analyzed the role of one or some of these factors. Specifically, the theoretical model indicates that the exchange rate pass-through should be between one and zero, while it is positively affected by the share of tradable inputs in total cost, and the domestic firms' market share and negatively by the elasticity of marginal cost with respect to output. The sign for the degree of substitutability among the variants is not theoretically clear and remains as an empirical question.<p> Finally, the third essay presents the empirical framework for estimation of the exchange rate pass-through and its determinants in Canadian manufacturing industries. In this essay, the short- and long-run exchange rate pass-through elasticities to the domestic producer prices are estimated for the industries at three, four and few cases of five-digit levels of NAICS (about 100 industries), using quarterly data from 1992-2007. Then, the pass-through variation across industries is explained by regressing the estimated pass-through elasticities on the variables that are hypothesized to affect the pass-through elasticities according to the developed theoretical model. The results indicate that incomplete pass-through is observed in most cases although its magnitude is different across industries. The average short- and long-run pass-through elasticities are 0.24 and 0.36 respectively. The share of intermediate materials, as the tradable inputs, in production costs (with positive effect) and the elasticity of marginal cost with respect to output (with negative effect) are the most important determinants of the exchange rate pass-through across industries.

The CWB has the stated objective of increasing producer returns through maximizing sales revenue and minimizing operating costs. To maximize producer returns the CWB derives value from single-desk selling, price pooling and the initial price guarantee.<p> The initial price allows the CWB to offer a price floor to producers which is guaranteed by the Federal government. This guarantee has come under review in recent World Trade Organization (WTO) negotiations with opponents stating that the Federal government is unfairly subsidizing producers. Therefore developing methods to hedge the initial payment and remove the CWB dependency on the Federal government guarantee has taken on considerable importance.<p> Hedging the initial price has two components, the first is commodity risk, and the second is currency risk. Commodity risk basically consists of the risk that wheat prices decrease significantly from the announcement of the initial payment resulting in a wheat pool account deficit. Currency risk relates to the risk of the Canadian dollar (CAD) increasing vis-à-vis the United States dollar (USD) resulting in lower wheat prices. This is due to the fact most sales are made in USD, necessitating the conversion of USD for CAD in order to pay Canadian producers. Given recent increases in exchange rate volatility this later risk is important. <p> The goal of this study is to evaluate the currency risk present in the initial payment and to examine alternate means of mitigating this risk. A number of call option strategies will be evaluated to determine its ability to reduce the probability of a wheat pool account deficit by offsetting the effect of a rising CAD.<p> The policy variables analyzed in the thesis are the initial payment as a percentage of the Pool Return Outlook for wheat and the strike price of the call options purchased. Therefore the study will examine the effect of inputting varying initial payment levels and different strike prices for the call options in the model. This will allow for quantifiable insight into cost versus risk reduction comparisons. These comparisons will be useful in determining the most efficient mode of action for the CWB.

This dissertation consists of three independent essays in Macroeconomics. The first essay analyzes monetary coordination between currency areas. It is shown that search frictions can generate the deviations from the law of one price and that each country is tempted to exploit these deviations by inflation. Monetary coordination eliminates the inefficiency caused by inflation. The welfare gains from coordination increase when the two economies become more integrated. In contrast to traditional models, the need for coordination exists even after each country is allowed to directly tax foreign holdings of its currency. The second essay studies the behavior of exchange rates in an environment with search frictions. In contrast to traditional models, even without any nominal rigidity, the model can generate enough volatility of exchange rates found in the data. The changes in the behavior of exchange rates under different regimes are also examined in this essay. The model shows a sharp increase in the volatility of exchange rates when moving from a pegged to a floating exchange regime, while there is no such systematic change in fluctuations of output or consumption. Moreover, the co-movements of output and consumption across countries are higher under a fixed rate regime than under a flexible rate regime. These results are consistent with empirical findings. The final essay focuses on the competition between groups of allied firms. In the essay we propose a model of group fitness and develop an approach to evaluate the fitness of groups and the utility of their member firms. A group has high fitness if member firms have four features: (i) high capacity, (ii) being embedded in dense relationships, (iii) holding complementary resources and (iv) having limited competition and conflict. We illustrate the effectiveness of our model and methodology by applying it to the airline groups between 1997 and 2002. By examining what really happened to the airline groups afterwards, we found that the predictions based on the comparison between the fitness scores of actual groups formed and those of the corresponding population constructed are reasonably accurate, and that the implications based on the ranking of individual firm utility within each group are generally supported.