Podcast
Questions and Answers
What is the main source of nonlinearity in the adjustment of the nominal exchange rate?
What is the main source of nonlinearity in the adjustment of the nominal exchange rate?
- The continuous rather than discrete adjustment process as shown in the iceberg model of Dumas (1992).
- The interaction of heterogeneous agents in the foreign exchange market at the microstructural level. (correct)
- The tendency for the authorities to intervene in the foreign exchange market.
- The divergent process when no trade takes place within the transaction costs band.
What does the text say about the behavior of the log-level of the real exchange rate near its equilibrium level?
What does the text say about the behavior of the log-level of the real exchange rate near its equilibrium level?
- It is highly volatile and unpredictable.
- It is increasingly mean reverting.
- It follows a random walk process.
- It is close to a random walk. (correct)
What does the text say about the speed of mean reversion of the real exchange rate for larger shocks?
What does the text say about the speed of mean reversion of the real exchange rate for larger shocks?
- The speed of mean reversion is the same for all shock sizes.
- The speed of mean reversion is faster for larger shocks. (correct)
- The speed of mean reversion is slower for larger shocks.
- The speed of mean reversion is unpredictable for larger shocks.
What is the range of half-lives of shocks to the real exchange rates near their equilibrium levels according to the text?
What is the range of half-lives of shocks to the real exchange rates near their equilibrium levels according to the text?
What is the effect of official intervention in the foreign exchange market on the adjustment of the nominal exchange rate?
What is the effect of official intervention in the foreign exchange market on the adjustment of the nominal exchange rate?
What are the potential sources of nonlinearities in international goods arbitrage mentioned in the text?
What are the potential sources of nonlinearities in international goods arbitrage mentioned in the text?
What is the implication of assuming instantaneous goods arbitrage at the edges of the band?
What is the implication of assuming instantaneous goods arbitrage at the edges of the band?