Capital Flows, Exchange Rate Flexibility, and the Real Exchange Rate

2011 ◽  
Author(s):  
Jean-Louis Combes ◽  
Patrick Plane ◽  
Tidiane Kinda
Keyword(s):  
Exchange Rate ◽  
Real Exchange Rate ◽  
Capital Flows ◽  
Exchange Rate Flexibility ◽  
The Real

Capital flows, exchange rate flexibility, and the real exchange rate

2012 ◽  
Vol 34 (4) ◽  
pp. 1034-1043 ◽  
Author(s):  
Jean-Louis Combes ◽  
Tidiane Kinda ◽  
Patrick Plane
Keyword(s):  
Exchange Rate ◽  
Real Exchange Rate ◽  
Capital Flows ◽  
Exchange Rate Flexibility ◽  
The Real

Capital Flows, Exchange Rate Flexibility, and the Real Exchange Rate

2011 ◽  
Vol 11 (9) ◽  
pp. 1 ◽  
Author(s):  
Jean-Louis Combes ◽  
Patrick Plane ◽  
Tidiane Kinda ◽  
◽  
◽  
...  
Keyword(s):  
Exchange Rate ◽  
Real Exchange Rate ◽  
Capital Flows ◽  
Exchange Rate Flexibility ◽  
The Real

scholarly journals Net capital flows to and the real exchange rate of Western Balkan countries

2015 ◽  
Vol 60 (205) ◽  
pp. 31-52 ◽  
Author(s):  
Hubert Gabrisch
Keyword(s):  
Exchange Rate ◽  
Real Exchange Rate ◽  
Capital Flows ◽  
Unit Labour Cost ◽  
Labour Cost ◽  
Capital Inflows ◽  
The Real ◽  
Relative Unit ◽  
Inflation Differential ◽  
Balkan Countries

This paper uses Granger causality tests to assess the linkages between changes in the real exchange rate and net capital inflows using the example of Western Balkan countries, which have suffered from low competitiveness and external imbalances for many years. The real exchange rate is a measure of a country?s price competitiveness, and the paper uses two concepts: relative unit labour cost and relative inflation differential. The sample consists of six Western Balkan countries for the period 1996-2012, relative to the European Union (EU). The main finding is that changes in the net capital flows precede changes in relative unit labour costs and not vice versa. Also, there is evidence that net capital flows affect the inflation differential of countries, although to a less discernible extent. This suggests that the increasing divergence in the unit labour cost between the EU and Western Balkan countries up to the global financial crisis was at least partly the result of net capital inflows. The paper adds to the ongoing debate on improving cost competitiveness through wage restrictions as the main vehicle to avert the accumulation of current account imbalances. It shows the importance of changes in the exchange rate regime, reform of the interaction between the financial and the real sector, and financial supervision and structural change.

Thirlwall's law and the terms of trade: a parsimonious extension of the balance-of-payments-constrained growth model

2019 ◽  
Vol 7 (4) ◽  
pp. 463-485
Author(s):  
Esteban Pérez Caldentey ◽  
Juan Carlos Moreno-Brid
Keyword(s):  
Exchange Rate ◽  
Real Exchange Rate ◽  
Growth Model ◽  
Capital Flows ◽  
Export Performance ◽  
Terms Of Trade ◽  
Balance Of Payments ◽  
The Real ◽  
Elasticity Of Demand ◽  
Foreign Capital Inflows

This paper extends the balance-of-payments-constrained (BoPC) growth model and Thirlwall's law to include the terms of trade with and without capital flows. Without capital flows a positive (negative) change in the terms of trade by improving (worsening) export performance can ceteris paribus augment (reduce) the rate of growth of an economy compatible with balance of payments’ long-run equilibrium. With the inclusion of capital flows the BoPC dynamics become more complex. Assuming no changes in the real exchange rate and in the import elasticity of demand, an improvement in the terms of trade can increase the level of the external deficit compatible with BoPC growth. This results from the terms-of-trade effects on the purchasing of exports and on foreign-capital inflows. The positive effect of an improvement in the terms of trade may be partially offset by an appreciation of the real exchange rate and an increase in the import elasticity of demand, when the model is extended to allow for such interactions in the analysis.

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