Christine Sauer

Exchange Rate Volatility and Exports: Regional Differences between Developing and Industrialized Countries

This study uses a large panel of industrialized and developing countries to investigate the link between exchange rate volatility and exports. Although the empirical literature on this relationship is extensive, a clear consensus about its nature and importance is yet to emerge. Using fixed- and random-effects models to capture cross-country differences, pooled export equations are estimated for the entire panel and various subsets of countries. The results, which are robust across different volatility measures, indicate that negative effects exist for LDC exports, especially from Latin America and Africa, but not for exports from Asian LDCs or industrialized countries. Copyright 2001 by Blackwell Publishing Ltd.

Money, interest rate spreads, and economic activity

Money, Interest Rate Spreads, and Economic Activity. —Numerous empirical studies for industrial countries have shown that the term structure of interest rates is a good indicator for future output growth. This paper analyzes whether the interest rate spread contains any additional predictive power if the model includes the money stock. A multivariate error-correction framework is applied to three European economies — France, Germany, and Italy. Granger causality tests are performed for various monetary aggregates and the term structure. The evidence concerning the marginal information content is mixed: For France and Italy, the term structure does not improve the results of the basic model whereas it is significant for Germany.ZusammenfassungGeldmenge, Zinsdifferenz und wirtschaftliche Aktivität. —Zahlreiche empirische Studien für Industriestaaten zeigen, daβ die Differenz zwischen langund kurzfristigen Zinsen ein guter Frühindikator für die gesamtwirtschaftliche Produktion ist. Der vorliegende Aufsatz untersucht für drei westeuropäische Länder (Deutschland, Frankreich und Italien), ob die Zinsdifferenz die Prognosequalität des Modells verbessert, das eine Geldmengengröβe enthält. Dazu werden multivariate Fehlerkorrekturmodelle geschätzt und Tests auf Granger-Kausalität durchgeführt. Die Evidenz hinsichtlich des marginalen Informationsgehalts der Zinsdifferenz ist unterschiedlich: Für Frankreich und Italien wird die Prognosegüte des Basismodells durch die Hinzunahme dieser Variablen nicht verbessert, während für Deutschland ein signifikanter Einfluβ vorliegt.

The role of inflation uncertainty in Germany: Friedman's hypothesis revisited

The paper reconsiders Friedmans (1977) proposition that increased inflation uncertainty may have adverse real effects for the German case. A proxy for the unobservable uncertainty variable is obtained from the Kalman-filtering estimation of a time-varying parameter model of inflation. This measure is introduced into an output equation that also includes anticipated and unanticipated inflation, thus allowing tests of both the Friedman and the Macro Rational Expectations hypotheses. The empirical evidence does not provide strong support for Friedmans view. Unanticipated inflation, on the other hand, seems to play a significant role for German output growth in the short run.

Competing macro-hypotheses in the United States: A Kalman filtering approach

The empirical validity of alternative views about the short-run determinants of real output growth in the United States is investigated. A nested framework is used to test the macro rational expectations (MRE) hypothesis directly against two competing hypotheses - the neo-Keynesian view that anticipated and unanticpated monetary policy both matter,and Friedmans (1977) proposition that increased inflation uncertainty reduces real output at least temporarily. The unobservable explanatory variables are obtained from time-varying-parameter models of inflation and money growth, which generate forecast errors and their conditional variances consistent with rational expectations under a continuously chaning policy regime. The empirical results strongly support Friedmans view. The MRE hypothesis must be rejected since both anticipated and unanticipated monetary changes matter. The results prove robust across different model specifications and estimation techniques.

A VARMA analysis of German money and income data: Fixed versus flexible exchange rates

ZusammenfassungEine VARMA-Analyse deutscher Geld- und Einkommensdaten: Feste versus flexible Wechselkurse. — In diesem Aufsatz wird die VARMA-Methode (Vektor-autoregressive gleitende Durchschnitte) benutzt, um die Beziehungen zwischen dem Realeinkommen, der realen Geldmenge und dem realen Zinssatz in der Bundesrepublik zu untersuchen. Es werden zwei verschiedene Modelle aufgestellt, geschätzt und getestet für die Perioden mit festen und flexiblen Wechselkursen. Auf der Grundlage von Granger Kausalitätstests wird gezeigt, daß reale Geldmenge und realer Zinssatz das reale BSP bei flexiblen, aber nicht bei festen Wechselkursen beeinflussen. Diese Ergebnisse entsprechen theoretischen Analysen über die Wirksamkeit der Geldpolitik bei verschiedenen Wechselkurssystemen und weichen von früheren Untersuchungen deutscher Daten ab, die diese Unterschiede in den Systemen nicht berücksichtigen. Außerdem wird in dem Artikel eine Rückwirkung des realen BSP auf die reale Geldmenge (aber nicht auf den realen Zinssatz) nur für die Periode mit flexiblen Wechselkursen ermittelt.RésuméUne analyse VARMA des données de la monnaie et du produit national de l’Allemagne: les cours de change fixes contre les cours de change flexibles. — Cette étude adopte la VARMA-méthodologie pour analyser les relations entre le revenu réel, la monnaie réelle et le taux d’intérêt réel en Allemagne. On a identifié, évalué, vérifié et soumis à un test deux modèles séparés pour les périodes des cours de change fixes et flexibles. Sur la base du test de causalité de Granger, la monnaie réelle et le taux d’intérêt réel influencent le produit national brut réel sous des cours de change flexibles mais pas sous des cours de change fixes. Ces résultats sont conformes aux analyses théoretiques sur l’efficacité de la politique monétaire sous des systèmes alternatifs des cours de change, mais ils sont différents des études précédentes des données allemandes qui manquent de prendre en considération la différence principale entre ces deux périodes. En plus on a découvert une répercussion du produit national brut réel sur M1 réelle (mais pas de taux d’intérêt réel) seulement pour la période des cours de change flexibles.ResumenUn análisis VARMA de datos sobre la moneda y el ingreso alemanes: tipos de cambio fijos versus tipos de cambio flexibles. — En este trabajo se adopta la metodologia del vector autoregresivo de promedio móvil (VARMA) para analizar las relaciones entre el ingreso real, la oferta monetaria real y la tasa de interés real para Alemania. Dos modelos separados son identificados, estimados, controlados y sometidos a un test para los subperiodos de tasas de cambio fijas y flexibles. Segùn un test de causalidad de Granger ni la oferta monetaria real ni la tasa de interés real influencian el PBN real bajo tasas de cambio fijas, mientras que, bajo tasas de cambio flexibles, el PBN real es afectado por ambas variables monetarias. Estos resultados son consistentes con la diferencia teórica que existe con respecto a la efecti vidad de la politica monetaria bajo régimenes de tasas de cambio alternatives y, por ello, difieren de estudios previos de datos alemanes, los cuales no toman en cuenta el cambio de régimen. Además, se détecta un “feedback” del PBN real a la M1 real (pero no a la tasa de interés real) sólo durante el periodo de cambios flexibles.

A modular approach to seigniorage in a monetary union

There is little agreement on how to measure seigniorage changes and their sources in a monetary union. This paper informs the debate by developing a modular approach that distinguishes between seigniorage changes a country experiences during the transition phase prior to joining a monetary union and at the time of the regime change when the common currency is introduced. Using the Eurozone enlargement as an example, the underlying components of seigniorage changes for the transition phase and the regime change are identified and quantified. The modular approach thus allows a more informed discussion and provides analysts and policymakers with flexibility as to which seigniorage components to choose depending on the economic issue at hand.

Fixed Versus Flexible Exchange Rates in the Open Economy: Theory and Reality

The literature survey of the previous chapter indicates that the openness of the German economy has concerned many researchers. Macromodels are “opened up” to include external factors which affect the domestic economy through different channels. Empirical results, revealing structural breaks in the behavior of macrovariables and their relationships, are attributed to the transition from fixed to more flexible exchange rates in the early 1970’s. Yet, few authors subject their open economy modifications to rigorous statistical tests.

The German Economy: 1960–1985

The emergence of the German economy as a bastion of economic stability and its success in dealing with major economic shocks since the 1960’s can largely be attributed to the consensus among all groups involved in the economic decision making process. Historical, political, and psychological factors — the experience of two hyperinflations and the vast destruction of World War II — explain the overriding concern with economic stability and security which is reflected in many of the formal and informal institutional arrangements in Germany today.

Survey and Critique of the Literature: Empirical Studies of the German Macroeconomy

A complete literature survey for our study would encompass numerous theoretical and empirical contributions covering a wide spectrum of issues in “traditional” as well as open economy macroeconomics. Given the abundance of material available to the researcher and, hence, the need to be selective, this review highlights the findings of previous empirical studies which deal with the German macroeconomy either exclusively or in the context of cross-country comparisons. When of interest, studies of other open economies are also mentioned.