This study aims to analyze the causes and consequences of sudden stops in international capital flows with special reference to the recent Turkish experience. We aim to investigate also the vulnerability of the Turkish economy to a sudden stop and compute the required change in the real exchange rates for a current account adjustment in the face of a sudden stop. The assessment of the economic and structural indicators, which are assumed to be related with the resilience of the economy against sudden stops, such as openness and dollarization, refers that the risk of experiencing a sudden stop has increased in Turkey in the last two years, despite a decrease in its exposure to the destructive effects of such shocks thanks to the structural improvements in the economy. Our empirical results based on a small open economy model with tradables and non-tradables suggest that a sudden stop that requires the closing of the current account imbalance in Turkey would necessitate a real depreciation of around 36 percent as of May 2008 under the assumption that international reserves were not used in order to mitigate the level and the effects of the adjustment. Although the effects of such a real depreciation may be milder due to the decreased currency mismatches in the public and banking sector, there is still the risk of experiencing a financial crisis following a sudden stop because of the high liability dollarization in the real sector.

Esta dissertação apresenta a importância dos condicionantes externos ao desenvolvimento econômico e destaca o papel da taxa real de câmbio em impulsionar o setor de bens comercializáveis, os quais, além de melhorar a situação externa, têm a capacidade de induzir o crescimento econômico no longo prazo. Para isso se trará a importância do crescimento econômico compatível com o “equilíbrio” do balanço de pagamentos e se analisará os resultados da estratégia de inserção brasileira no processo de globalização financeira sob a perspectiva da vulnerabilidade externa. Em seguida são realçados os impactos da taxa real de câmbio no setor externo e no desenvolvimento econômico, tanto no aspecto teórico como aplicado ao Brasil após o Plano Real. Por fim, são realizados testes econométricos, utilizando-se do método Almon lag, para estimar os impactos da taxa real de câmbio na balança comercial e nos seus principais componentes. Os resultados encontrados para o caso brasileiro corroboram o argumento de que a taxa real de câmbio contribui para a melhora da situação externa e incentiva o setor exportador, especialmente o de bens manufaturados. / This dissertation presents the importance of external constraints to economic development and highlights the role of real exchange rate to boost the tradable sector, which improve the external position and induce economic growth in the long run. It is considered the importance of economic growth consistent with the equilibrium of balance of payments and it is examined the results of international insertion strategy in the Brazilian financial globalization from the perspective of external vulnerability. Are then highlighted the impact of real exchange rate in the external sector and economic development, both in theoretical and applied to Brazil after the Real Plan. Finally econometric tests are performed, using the Almon lag method to estimate the impact of real exchange rate on trade balance and its main components. The results for the Brazilian case corroborate the argument that the real exchange rate contributes to the improvement in the external environment and encourages the export sector, especially of manufactured goods.

Esta dissertação apresenta a importância dos condicionantes externos ao desenvolvimento econômico e destaca o papel da taxa real de câmbio em impulsionar o setor de bens comercializáveis, os quais, além de melhorar a situação externa, têm a capacidade de induzir o crescimento econômico no longo prazo. Para isso se trará a importância do crescimento econômico compatível com o “equilíbrio” do balanço de pagamentos e se analisará os resultados da estratégia de inserção brasileira no processo de globalização financeira sob a perspectiva da vulnerabilidade externa. Em seguida são realçados os impactos da taxa real de câmbio no setor externo e no desenvolvimento econômico, tanto no aspecto teórico como aplicado ao Brasil após o Plano Real. Por fim, são realizados testes econométricos, utilizando-se do método Almon lag, para estimar os impactos da taxa real de câmbio na balança comercial e nos seus principais componentes. Os resultados encontrados para o caso brasileiro corroboram o argumento de que a taxa real de câmbio contribui para a melhora da situação externa e incentiva o setor exportador, especialmente o de bens manufaturados. / This dissertation presents the importance of external constraints to economic development and highlights the role of real exchange rate to boost the tradable sector, which improve the external position and induce economic growth in the long run. It is considered the importance of economic growth consistent with the equilibrium of balance of payments and it is examined the results of international insertion strategy in the Brazilian financial globalization from the perspective of external vulnerability. Are then highlighted the impact of real exchange rate in the external sector and economic development, both in theoretical and applied to Brazil after the Real Plan. Finally econometric tests are performed, using the Almon lag method to estimate the impact of real exchange rate on trade balance and its main components. The results for the Brazilian case corroborate the argument that the real exchange rate contributes to the improvement in the external environment and encourages the export sector, especially of manufactured goods.

Apesar da recente queda no crescimento das exportações, a resposta das vendas externas à valorização cambial tem sido mais lenta do que previa a teoria econômica. Essas evidências sugerem a lentidão na correção dos desvios de uma relação de longo prazo entre o câmbio e as exportações, motivando a pesquisa sobre a presença de hysteresis no comércio brasileiro. O objetivo deste estudo é confirmar as predições da teoria de hysteresis em nível macroeconômico para as exportações manufaturadas brasileiras. Para isso, propõe-se um diferencial metodológico: a inclusão, nos modelos de oferta e demanda de exportações, de variável representativa de hysteresis, construída segundo o método de Piscitelli et al. (2000), testando sua significância nas equações. São utilizados modelos com dados em painel, metodologia que permite lidar com efeitos específicos aos setores industriais e realizar testes de hysteresis para o total das exportações manufaturadas a partir de informações desagregadas, proporcionado maior eficiência na estimação. Além disso, é investigada a estacionariedade das séries de dados, realizando testes para raiz unitária e cointegração em painel. Também são estimados os parâmetros das relações de longo prazo entre as variáveis. Os resultados confirmam a hipótese de uma relação de hysteresis, em especial, nas equações de demanda por exportações brasileiras. / In spite of the recent fall of the growth rate of Brazilian exports, the response of external sales to the appreciation of the exchange rate has been slower than what was predicted by economic theory. These evidences suggest that deviations from a long-run relationship between exchange rate and exports may take longer to be corrected, motivating the investigation of the presence of hysteresis in Brazilian international trade. The purpose of this study is to evaluate the applicability of the theory of macro-hysteresis to Brazilian manufactured exports. Thus, a distinct methodology is proposed: including a hysteretic variable in the equations of export supply and demand as an explanatory variable. This variable is constructed as the method developed by Piscitelli et al. (2000) and will be tested in order to assess its power in capturing the hysteretic effect. This study uses panel data which allow for heterogeneity among the industrial sectors and admits testing the hysteresis hypothesis in the aggregate exports through disaggregated information; hence, panel data will lead to more efficiency when estimating models. Furthermore, the stationarity of the data series is investigated through panel unit root and cointegration tests and the long run relationship parameters are estimated. Results confirm the hypothesis of the presence of a hysteretic relationship, especially in the demand equations.

Submitted by Pierre Marinho (pierre.marinho@uol.com.br) on 2013-03-08T15:52:05Z No. of bitstreams: 1 MPFE_Dissertacao_Pierre da Silva Marinho_VF.pdf: 205056 bytes, checksum: f7e17dd57f3b948dffa3140396cbbb86 (MD5) / Approved for entry into archive by Suzinei Teles Garcia Garcia (suzinei.garcia@fgv.br) on 2013-03-08T15:55:29Z (GMT) No. of bitstreams: 1 MPFE_Dissertacao_Pierre da Silva Marinho_VF.pdf: 205056 bytes, checksum: f7e17dd57f3b948dffa3140396cbbb86 (MD5) / Made available in DSpace on 2013-03-08T15:57:28Z (GMT). No. of bitstreams: 1 MPFE_Dissertacao_Pierre da Silva Marinho_VF.pdf: 205056 bytes, checksum: f7e17dd57f3b948dffa3140396cbbb86 (MD5) Previous issue date: 2013-02-05 / The objective of this paper is to analyze the evidences of long-run relationship among three variables: real exchange rate ('RER'), international investment position ('NFA') and the Balassa-Samuelson effect ('PREL') in a group of 28 countries. This group is composed of countries in different stages of economic development. The methodology utilized to assess long-run relationship was cointegration. The tests performed were developed by Bierens (1997), nonparametric test, and by Saikkonen and Lütkepohl (2000a, b, c), test that firstly estimates a deterministic term. Evidences of cointegration were found in both tests for the majority of the countries. However, there were significant differences between the results of the two performed tests. These differences between the two results and also some special cases of countries that did not demonstrated evidences of cointegration require deeper studies on the long-run behavior of the three variables analyzed in this paper. / Este trabalho tem a finalidade de analisar as evidências de relações de longo prazo entre a taxa de câmbio real ('RER'), a posição internacional de investimentos ('NFA') e o efeito Balassa-Samuelson ('PREL') em um grupo de 28 países, grupo este que inclui países em diferentes estágios de desenvolvimento. A metodologia utilizada foi a de testes de cointegração. Os testes aplicados foram desenvolvidos por Bierens (1997), teste não paramétrico, e por Saikkonen e Lütkepohl (2000a, b, c), teste que consiste em primeiro estimar um termo determinístico. Evidências de cointegração são constatadas, em ambos os testes, na maioria dos países estudados. Entretanto, houve diferenças relevantes entre os resultados encontrados através dos dois testes aplicados. Estas diferenças entre os resultados, bem como alguns casos especiais de países que não demonstraram evidências de cointegração, requerem análises mais aprofundadas sobre o comportamento de longo prazo das três variáveis estudadas.

Exchange rate economics has achieved substantial development in the past few decades. Despite extensive research, a large number of unresolved problems remain in the exchange rate debate. This dissertation studied three puzzling issues aiming to improve our understanding of exchange rate behavior. Chapter Two used advanced econometric techniques to model and forecast exchange rate dynamics. Chapter Three and Chapter Four studied issues related to exchange rates using the theory of New Open Economy Macroeconomics. Chapter Two empirically examined the short-run forecastability of nominal exchange rates. It analyzed important empirical regularities in daily exchange rates. Through a series of hypothesis tests, a best-fitting fractionally integrated GARCH model with skewed student-t error distribution was identified. The forecasting performance of the model was compared with that of a random walk model. Results supported the contention that nominal exchange rates seem to be unpredictable over the short run in the sense that the best-fitting model cannot beat the random walk model in forecasting exchange rate movements. Chapter Three assessed the ability of dynamic general-equilibrium sticky-price monetary models to generate volatile foreign exchange risk premia. It developed a tractable two-country model where agents face a cash-in-advance constraint and set prices to the local market; the exogenous money supply process exhibits time-varying volatility. The model yielded approximate closed form solutions for risk premia and real exchange rates. Numerical results provided quantitative evidence that volatile risk premia can endogenously arise in a new open economy macroeconomic model. Thus, the model had potential to rationalize the Uncovered Interest Parity Puzzle. Chapter Four sought to resolve the consumption-real exchange rate anomaly, which refers to the inability of most international macro models to generate negative cross-correlations between real exchange rates and relative consumption across two countries as observed in the data. While maintaining the assumption of complete asset markets, this chapter introduced endogenously segmented asset markets into a dynamic sticky-price monetary model. Simulation results showed that such a model could replicate the stylized fact that real exchange rates tend to move in an opposite direction with respect to relative consumption.

Do renminbi (RMB) exchange rate fluctuations affect cross-border M&A activities of enterprises at the micro level? This paper centers on this major issue, and we study and analyze the impacts of RMB internationalization on the magnitude and success of cross-border M&As. We investigate the impacts of exchange rate changes on the magnitude and success of enterprise-level cross-border M&As by developing nominal exchange rate (NER) and real exchange rate (RER) volatility indicators using data from the Thomson Financial SDC Platinum Merger and Acquisitions database. By applying a variety of indicators and subsample estimates in the study, we find that exchange rate volatility (of either NER or RER) is significantly negatively correlated with enterprise-level cross-border M&As, suggesting that RMB exchange rate movements deter cross-border M&As to some extent; fluctuations in RMB exchange rate have a significant negative impact on the success of cross-border M&As, and the exchange rate risk induced by exchange rate changes increases the risk of cross-border M&As; meanwhile, exchange rate fluctuations have a significant inhibitory effect on conglomerate M&As in addition to horizontal cross-border M&As. In addition, exchange rate fluctuations have a significant inhibitory effect on the profit-oriented cross-border M&As of enterprises in non-state-owned-or-controlled industries. Therefore, we should take prudent actions to prevent the impacts of RMB exchange rate movements on cross-border M&As, actively tap the potential of bilateral investment treaties in securing cross-border M&As, promote coordination between RMB exchange rate regulation iimechanisms and the “go global” strategy, and improve the level of internationalization and competitiveness of Chinese enterprises. / Business Administration/Finance

The objective of this thesis is to examine real exchange rate volatility, with a particular focus on investigating the causes of exchange rate jumps. While the predominant approach in the literature is to examine the interaction between nominal rigidities and nominal shocks, this thesis examines the volatility that arises from real rigidities and shocks. Trying to better understand the transmission of real shocks to the exchange rate is a worthwhile task, given the substantial evidence that these shocks and rigidities are important for explaining other economic fluctuations. This thesis develops theoretical models that examine the contributions of specific real rigidities to exchange rate volatility. Chapter 1 introduces our baseline specification - a frictionless model, with the exception of capital adjustment costs. This baseline generates very mild exchange rate fluctuations. Additional rigidities are required to generate volatility of the magnitude that is typically observed. Chapter 2 finds that introducing imperfect asset substitutability - specifically, home asset bias - goes a little towards achieving this. When investors are biased, the exchange rate must adjust by more to equilibrate asset markets. This greater burden of adjustment on the exchange rate along the short run path typically translates to larger jumps after shocks. Similarly, Chapter 3 shows that augmenting the baseline with banks and financial frictions raises exchange rate volatility. The key point is that, in the presence of financial frictions, there is a risk premium that widens after negative shocks, increasing the required adjustment of the exchange rate. A fourth chapter extends Chapter 3 and shows that unconventional credit policy, while beneficial in some respects, nonetheless entails nontrivial costs because it invites moral hazard by encouraging banks to be more highly leveraged, which increases exchange rate and consumption volatility. So, the overall message is that, in the presence of plausible real frictions - including (i) capital adjustment costs, (ii) imperfect asset substitutability, and (iii) financial frictions - real shocks can generate a plausibly significant degree of real exchange rate volatility. This thus posits an additional explanation of exchange rate jumps that complements the predominantly monetary literature.

Differences in price levels as well as inflation rates among countries have been subject of discussion for a long time. More than the actual levels, however, the question of determinants of price levels in time and a possible convergence is key for the new member states with respect to the Maastricht criteria. The dynamics of price levels is crucial, and many suggestions have been put forward to explain the observed trends and changes. This thesis focuses on the determinants of relative price level, and hence real exchange rate, developments in the new member states of the EU and employs a regression analysis to examine their change in time. As most of the countries in focus are transition economies, structural variables are also included among the independent variables. We find that the Balassa- Samuelson effect is key to explaining real exchange rate developments as the effect of productivity differential has been significant over the whole period examined. However, in the recent years, marked by the onset of the crisis, other factors, such as the structure of trade and Euro area membership, have become more prominent.

In literature it has been stated that in times of low capital barriers policies can impact real exchange rates (RERs) and, it has been shown that RERs influence foreign direct investment (FDI). As inward FDI is a growth stimulating factor for the German economy and as more than a third of inward FDI stems from countries in the European Union (EU), this study investigates the RER-FDI link between Germany and seven EU countries. The impact of bilateral RERs between Germany and seven EU countries on German net FDI inflows is examined for the period 1974-2018. Further, it is investigated how the euro introduction in 1999 affected the RER-FDI links. Using Ordinary Least Squares models it is found that in the pre-euro period a real German currency appreciation led to decreases in net FDI from most economies in scope. This negative RER-FDI link endures for the non-euro countries Sweden, Denmark, and the United Kingdom after the euro introduction. France, Italy, and Spain, euro countries, are subject to the euro-effect: the negative RER-FDI link changes to a positive link with the euro introduction. This phenomenon indicates an altering investment behavior. The results are strengthened by a panel estimation as robustness check. As the euro-effect was not discovered in previous studies nor is a theory established explaining the altering investment behavior of euro firms, this thesis suggests an alternative explanation.