AG991 International Financial Markets and Banking

Workshop 9
Workshop Questions:

Briefly, what are the main arguments for fixed versus flexible exchange rate regimes?
(Please read any one of the papers marked **.)

Currently some central banks are actively intervening in financial markets to stimulate
their economies, for example using QE. Are there any insights offered by Greenwood
(2017) as to whether or not this is likely to be successful?

Question for self-study1: Explain the basic concept of purchasing power parity and
comment on the practicality of it as well as available
empirical evidence.

Central banks are the lender of last resort for domestic banks.
How effective are they in this role? Use Jacome et al. (2011)
in your answer.

Background reading (optional): ME ch 16 and HB ch 3&7 / A ch 7 / VM ch 3

Required reading *:

Taylor, M.P. (2003) ‘Purchasing Power Parity’, Review of International Economics 11(3), pp.
436–452. In addition to this or even instead of it, you can read: Taylor, A.M., and M.P. Taylor
(2004) ‘The Purchasing Power Parity Debate’, Journal of Economic Perspectives 18(4), pp.
135-158. www.ssc.wisc.edu/~mchinn/taylor&taylor_PPP_JEP.pdf

D’Arista, J. (2009) ‘The evolving international monetary system’, Cambridge Journal of

Economics 33, pp. 633–652.

**Kenen, P.B. (2000) ‘Fixed versus Floating Exchange Rates’, Cato Journal 20(1), pp. 109- 113.

**Hoffmann, M. (2005) ‘Fixed versus Flexible Exchange Rates: Evidence from Developing
Countries’, University of Cologne working paper. Available at: http://www.cfr-
cologne.de/download/workingpaper/cfr-05-03.pdf

Jacome H., L.I., Sedik, T.S., and Townsend, S. (2011) ‘Can Emerging Market Central Banks Bail
Out Banks? A Cautionary Tale from Latin America’, IMF Working Paper WP/11/258. Available
at: http://www.imf.org/external/pubs/ft/wp/2011/wp11258.pdf

Greenwood, J. (2017) ‘The Japanese Experience with QE and QQE’, Cato Journal 37(1), pp.17-
38 . Available at https://object.cato.org/sites/cato.org/files/serials/files/cato-
journal/2017/2/cj-v37n1-2.pdf

*links to these are also on myplace

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Guidance on a solution approach will be posted on myplace at a later date.

© Juliane Thamm – University of Strathclyde