19
Estimation of De Facto Exchange Rate Regimes: Synthesis of the Techniques for Inferring Flexibility and Basket Weights Discussion by Steven Kamin Federal Reserve Board Presentation given at the 8th Jacques Polak Annual Research Conference Hosted by the International Monetary Fund Washington, DCNovember 15-16, 2007 Please do not quote without the permission from the author(s). The views expressed in this presentation are those of the author(s) only, and the presence of them, or of links to them, on the IMF website does not imply that the IMF, its Executive Board, or its management endorses or shares the views expressed in the presentation. 8 TH J ACQUES P OLAK A NNUAL R ESEARCH C ONFERENCE N OVEMBER 15-16,2007

Estimation of De Facto Exchange Rate Regimes: Synthesis of ... · Restricting the Currency Weights Canada 2002-2005 Frankel-Wei Kamin Kamin Unrestricted JPY .324 .201 -.061 USD .449

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Page 1: Estimation of De Facto Exchange Rate Regimes: Synthesis of ... · Restricting the Currency Weights Canada 2002-2005 Frankel-Wei Kamin Kamin Unrestricted JPY .324 .201 -.061 USD .449

Estimation of De Facto Exchange Rate Regimes: Synthesis of the Techniques for

Inferring Flexibility and Basket Weights

Discussion by

Steven Kamin Federal Reserve Board

Presentation given at the 8th Jacques Polak Annual Research Conference Hosted by the International Monetary Fund Washington, DC─November 15-16, 2007 Please do not quote without the permission from the author(s). The views expressed in this presentation are those of the author(s) only, and the

presence of them, or of links to them, on the IMF website does not imply that the IMF, its Executive Board, or its management endorses or shares the views expressed in the presentation.

88TTHH JJAACCQQUUEESS PPOOLLAAKK AANNNNUUAALL RREESSEEAARRCCHH CCOONNFFEERREENNCCEE NNOOVVEEMMBBEERR 1155--1166,, 22000077

Page 2: Estimation of De Facto Exchange Rate Regimes: Synthesis of ... · Restricting the Currency Weights Canada 2002-2005 Frankel-Wei Kamin Kamin Unrestricted JPY .324 .201 -.061 USD .449

Com

men

ts o

n:“E

stim

atio

n of

De

Fact

o Ex

chan

ge

Rat

e R

egim

es: S

ynth

esis

of t

he

Tech

niqu

es fo

r Inf

errin

g Fl

exib

ility

an

d B

aske

t Wei

ghts

”Je

ffre

y Fr

anke

l and

Sha

ng-J

in W

ei

Stev

en B

. Kam

inFe

dera

l Res

erve

Boa

rdN

ovem

ber 1

6, 2

007

Page 3: Estimation of De Facto Exchange Rate Regimes: Synthesis of ... · Restricting the Currency Weights Canada 2002-2005 Frankel-Wei Kamin Kamin Unrestricted JPY .324 .201 -.061 USD .449

Exc

han

ge

rate

reg

imes

mat

ter

Exc

han

ge

rate

reg

imes

mat

ter

Much

work

focu

sed o

n iden

tify

ing

Much

work

focu

sed o

n iden

tify

ing

them

them

Part

icula

rly

at I

MF

Part

icula

rly

at I

MF

Page 4: Estimation of De Facto Exchange Rate Regimes: Synthesis of ... · Restricting the Currency Weights Canada 2002-2005 Frankel-Wei Kamin Kamin Unrestricted JPY .324 .201 -.061 USD .449

Jeff

and

Jeff

and

Sha

ngS

hang

-- JinJin ’’

s C

ontri

butio

ns

Con

tribu

tion

Som

e co

untr

ies

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et a

bas

ket

of

Som

e co

untr

ies

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et a

bas

ket

of

curr

enci

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cies

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gy

for

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ultan

eousl

y M

ethodolo

gy

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eousl

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entify

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urr

ency

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ghts

and

iden

tify

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urr

ency

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ghts

and

exch

ange

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fle

xibili

ty

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ange

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fle

xibili

ty

Page 5: Estimation of De Facto Exchange Rate Regimes: Synthesis of ... · Restricting the Currency Weights Canada 2002-2005 Frankel-Wei Kamin Kamin Unrestricted JPY .324 .201 -.061 USD .449

Fran

kel

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kel -- W

eiW

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asic

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cific

atio

nB

asic

Spe

cific

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n

%%Δ(Δ(

EESD

R/

SD

R/ t

hb

thb)=

C)=

C

+

[

w1*%

+

[

w1*%

Δ(Δ(EE

SD

R/J

ap.

SD

R/J

ap. )

+ w

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Δ(Δ(EE

SD

R/$

US

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R/$

US))

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1+

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%Δ(Δ(

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])

]

+

+

ββ *[

%*[

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SD

R/ t

hb

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%)+

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]]

Page 6: Estimation of De Facto Exchange Rate Regimes: Synthesis of ... · Restricting the Currency Weights Canada 2002-2005 Frankel-Wei Kamin Kamin Unrestricted JPY .324 .201 -.061 USD .449

Fran

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Page 7: Estimation of De Facto Exchange Rate Regimes: Synthesis of ... · Restricting the Currency Weights Canada 2002-2005 Frankel-Wei Kamin Kamin Unrestricted JPY .324 .201 -.061 USD .449

Hyp

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Page 8: Estimation of De Facto Exchange Rate Regimes: Synthesis of ... · Restricting the Currency Weights Canada 2002-2005 Frankel-Wei Kamin Kamin Unrestricted JPY .324 .201 -.061 USD .449

Hyp

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R/

SD

R/ t

hb

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Page 9: Estimation of De Facto Exchange Rate Regimes: Synthesis of ... · Restricting the Currency Weights Canada 2002-2005 Frankel-Wei Kamin Kamin Unrestricted JPY .324 .201 -.061 USD .449

Un

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Page 10: Estimation of De Facto Exchange Rate Regimes: Synthesis of ... · Restricting the Currency Weights Canada 2002-2005 Frankel-Wei Kamin Kamin Unrestricted JPY .324 .201 -.061 USD .449

Un

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Page 11: Estimation of De Facto Exchange Rate Regimes: Synthesis of ... · Restricting the Currency Weights Canada 2002-2005 Frankel-Wei Kamin Kamin Unrestricted JPY .324 .201 -.061 USD .449

Hyp

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ket i

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R/

SD

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SD

R/J

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SD

R/J

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K)

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%*[

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R/

SD

R/ t

hb

thb)

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Page 12: Estimation of De Facto Exchange Rate Regimes: Synthesis of ... · Restricting the Currency Weights Canada 2002-2005 Frankel-Wei Kamin Kamin Unrestricted JPY .324 .201 -.061 USD .449

Aus

tralia

Aus

tralia

Page 13: Estimation of De Facto Exchange Rate Regimes: Synthesis of ... · Restricting the Currency Weights Canada 2002-2005 Frankel-Wei Kamin Kamin Unrestricted JPY .324 .201 -.061 USD .449

Can

ada

Can

ada

Page 14: Estimation of De Facto Exchange Rate Regimes: Synthesis of ... · Restricting the Currency Weights Canada 2002-2005 Frankel-Wei Kamin Kamin Unrestricted JPY .324 .201 -.061 USD .449

Impl

icat

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Impl

icat

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Page 15: Estimation of De Facto Exchange Rate Regimes: Synthesis of ... · Restricting the Currency Weights Canada 2002-2005 Frankel-Wei Kamin Kamin Unrestricted JPY .324 .201 -.061 USD .449

Does

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est

imat

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ency

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ad t

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ette

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tim

ates

? le

ad t

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ette

r es

tim

ates

?

Page 16: Estimation of De Facto Exchange Rate Regimes: Synthesis of ... · Restricting the Currency Weights Canada 2002-2005 Frankel-Wei Kamin Kamin Unrestricted JPY .324 .201 -.061 USD .449

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Page 17: Estimation of De Facto Exchange Rate Regimes: Synthesis of ... · Restricting the Currency Weights Canada 2002-2005 Frankel-Wei Kamin Kamin Unrestricted JPY .324 .201 -.061 USD .449

Sep

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EU

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116

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Page 18: Estimation of De Facto Exchange Rate Regimes: Synthesis of ... · Restricting the Currency Weights Canada 2002-2005 Frankel-Wei Kamin Kamin Unrestricted JPY .324 .201 -.061 USD .449

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Page 19: Estimation of De Facto Exchange Rate Regimes: Synthesis of ... · Restricting the Currency Weights Canada 2002-2005 Frankel-Wei Kamin Kamin Unrestricted JPY .324 .201 -.061 USD .449

Con

clus

ion

Con

clus

ion

Inte

rest

ing a

nd p

rovo

cative

pap

erIn

tere

stin

g a

nd p

rovo

cative

pap

erN

ove

l m

ethodolo

gy

Nove

l m

ethodolo

gy

Hel

pfu

l fo

r co

untr

ies

that

may

tar

get

H

elpfu

l fo

r co

untr

ies

that

may

tar

get

m

ore

than

a s

ingle

curr

ency

more

than

a s

ingle

curr

ency

Req

uires

car

eful at

tention t

o d

ata,

Req

uires

car

eful at

tention t

o d

ata,

es

pec

ially

res

erve

ses

pec

ially

res

erve

sCom

ple

men

t to

, not

subst

itute

for,

Com

ple

men

t to

, not

subst

itute

for,

in

stitutional

anal

ysis

inst

itutional

anal

ysis