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This paper analyzes the export performance of Polish manufacturing firms. It focuses on the extensive and intensive margins of exports, on the decision to enter export markets and the intensity of exports, given participation, examining price and non-price determinants of export performance. The analysis relies on two different but complementary sources of data: a panel survey of Polish firms for 2005-13, and an exporter-level customs data set, for the same period, with detailed information on products and destinations. The findings reveal that firms face high sunk costs for entering export markets, and that once these costs have been paid, they depreciate rapidly over time. Strong positive local spillovers are also identified, which help reduce entry costs. Finally, the paper shows that the impact of real exchange rate fluctuations on firms' export performance is dependent of the degree of integration in international production networks.

Export Performance --- International Production Networks --- Liquidity --- Productivity --- R&D --- Real Exchange Rates --- Spillovers --- Sunk Costs --- Transition Economies

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In this paper we use an exchange rate model that combines asset market characteristics with balance of payments interactions to examine the nominal effective exchange rates of the German mark, Japanese yen, and U.S. dollar for the recent experience with floating exchange rates. Our approach may be interpreted as one which attempts to flesh out the missing links that arise in conditioning an exchange rate solely on relative prices, as occurs in a standard PPP analysis. In contrast to much other empirical exchange rate modeling, our approach explicitly involves the use of a current account sustainability term. Amongst the findings reported in this paper are: significant, and sensible, long-run relationships for all of the currencies studied; appealing short-run dynamics for two of the currencies; and a finding that the Japanese effective exchange rate closely tracks the long-run exchange rate defined in this paper.

Foreign Exchange --- Current Account Adjustment --- Short-term Capital Movements --- Currency --- Foreign exchange --- Exchange rates --- Purchasing power parity --- Exchange rate modelling --- Real exchange rates --- Exchange rate assessments --- United States

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Much recent analysis of international monetary and fiscal policy issues, such as the choice of an exchange-rate regime or the design of a policy coordination scheme, has been conducted by stochastic simulations with multicountry econometric models. In these studies, it has become standard practice to consider alternative policy rules of a particular form that calls for departures of a policy instrument, from some “baseline” reference path, that are proportional to deviations of a specified target variable from its own baseline path. The present paper argues, however, that this standard rule form is seriously defective for evaluating such issues because the implied rules (1) often fail to be operational and (2) have associated performance measures that can be misleading in important cases. An example is presented that concerns the international “assignment problem” of optimally pairing instruments with policy objectives.

Foreign Exchange --- Public Finance --- Forecasting and Other Model Applications --- Open Economy Macroeconomics --- Fiscal Policy --- Currency --- Foreign exchange --- Macroeconomics --- Real exchange rates --- Fiscal policy --- Exchange rate arrangements --- United States

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The paper examines the role of credibility in the conduct of exchange rate policy in developing countries, The analysis is based on a model in which policymakers are concerned about inflation and external competitiveness. Price setters in the nontraded goods sector of the economy adjust prices in reaction to anticipated fluctuations in the domestic price of tradable goods. This type of model is showm to generate a “devaluation bias” which undermines the credibility of a fixed exchange rate. The effect of reputational factors, signaling considerations, and joining a currency union as possible solutions to this bias is examined.

Foreign Exchange --- Inflation --- Development Planning and Policy: Trade Policy --- Factor Movement --- Foreign Exchange Policy --- Price Level --- Deflation --- Currency --- Foreign exchange --- Macroeconomics --- Exchange rates --- Conventional peg --- Real exchange rates --- Exchange rate policy --- Prices --- United Kingdom

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This paper studies the role of an increase in foreign exchange reserves in reducing currency volatility for emerging market countries. The study employs a panel of 28 countries over the period 1986-2002. Several control variables are introduced in the regressions to account for other factors affecting exchange rate volatility (monetary and external indicators as well as conventional macroeconomic fundamentals). The paper controls for the endogeneity induced by the role of the exchange rate regime, since the regime can affect both the level of reserves and exchange rate volatility. The results provide ample support for the proposition that holding adequate reserves reduces exchange rate volatility. The effect is strong and robust; moreover, it is nonlinear and appears to operate through a signaling effect.

Foreign exchange administration. --- Foreign exchange --- Finance: General --- Foreign Exchange --- General Financial Markets: General (includes Measurement and Data) --- Currency --- Finance --- Exchange rates --- Exchange rate arrangements --- Real effective exchange rates --- Real exchange rates --- Emerging and frontier financial markets --- Financial services industry --- Colombia