سیاست های پولی و خطا رفتن نرخ ارز :مناسب بودن دورن بوچ پس از اتمام

Dornbusch's exchange rate overshooting hypothesis is a central building block in international macroeconomics. Yet, empirical studies of monetary policy have typically found exchange rate effects that are inconsistent with overshooting. This puzzling result has been viewed by some researchers as a “stylized fact” to be reckoned with in policy modelling. However, many of these studies, in particular those using vector autoregressive (VARs) approaches, have disregarded the strong contemporaneous interaction between monetary policy and exchange rate movements by placing zero restrictions on them. In contrast, we achieve identification by imposing a long-run neutrality restriction on the real exchange rate, thereby allowing for contemporaneous interaction between the interest rate and the exchange rate. In a study of four open economies, we find that the puzzles disappear. In particular, a contractionary monetary policy shock has a strong effect on the exchange rate, which appreciates on impact. The maximum effect occurs within 1–2 quarters, and the exchange rate thereafter gradually depreciates to baseline, consistent with the Dornbusch overshooting hypothesis and with few exceptions consistent with uncovered interest parity (UIP)

Dornbusch's (1976) well-known exchange rate overshooting hypothesis is a central building block in international macroeconomics, stating that an increase in the interest rate should cause the nominal exchange rate to appreciate instantaneously, and then depreciate in line with uncovered interest parity (UIP). Its influence is evident in the rapidly growing “New Open Economy Macroeconomics” (NOEM) literature (see Obstfeld and Rogoff, 1995 and Obstfeld and Rogoff, 2000) as well as in practical policy discussions spanning far outside the academic sphere. With what seems like an ever-increasing number of citations, it has been described as one of the most important papers in international economics of the twentieth century (Rogoff, 2002). When confronted with data, however, few empirical studies that analyse the effects of monetary policy have found support for Dornbusch overshooting; see e.g. Sims (1992), Eichenbaum and Evans (1995) and Kim and Roubini (2000) for G7 countries, Peersman and Smets (2003) and Favero and Marcellino (2004) for the aggregate Euro area, Mojon and Peersman (2003) for individual Euro area countries and Lindé (2003) for Sweden. Instead, they have found that following a contractionary monetary policy shock, the real exchange rate either depreciates, or, if it appreciates, it does so only gradually and for a prolonged period of up to 3 years, thereby giving a hump-shaped response that violates UIP. In the literature, the first phenomenon has been termed the exchange rate puzzle, whereas the second has been referred to as delayed overshooting or the forward discount puzzle, see Cushman and Zha (1997). In light of all this evidence that is inconsistent with Dornbusch overshooting and UIP, one might expect the theory to have been abandoned by economists. Yet, this is not the case. Both the hypothesis of Dornbusch overshooting and the UIP remain at the core of theories of international economics. The elegance and clarity of the Dornbusch model as well as its obvious policy relevance has put it in a separate class from other international macroeconomic papers ( Rogoff, 2002). The common approach for establishing the quantitative effects of monetary policy in the above mentioned studies has been the structural vector autoregressive (VAR) approach, first initiated by Sims (1980).1 There is, however, a major challenge when analysing the open economy through structural VARs; namely how to properly address the simultaneity problem between monetary policy and the exchange rate. Most of the VAR studies of open economies (including those mentioned above), deal with a possible simultaneity problem by placing recursive, zero contemporaneous restrictions on the interaction between monetary policy and exchange rates.2 However, by not allowing for potential simultaneity effects in the identification of monetary policy shock, they may have produced a numerically important bias in the estimate of the degree of interdependence.3 This point has recently been emphasized by Faust and Rogers (2003), exploring sign restrictions. By dropping what they call dubious (zero contemporaneous) restrictions one by one, they find that the responses in the exchange rate to (U.S.) monetary policy are sensitive to the restrictions imposed. Their results allow for an early peak in the exchange rate, which may allow for the conventional overshooting model. However, the effect is not uniquely identified, so no robust conclusions can be drawn with regard to the exact timing of the peak response, which could be immediate or delayed. Similar results are also found in Scholl and Uhlig (2008), using a procedure related to that of Faust and Rogers (2003). Hence, the implied interest rate and exchange rate responses following a monetary policy shock continue to remain distinct from Dornbusch's prediction, with both the delayed overshooting feature and/or deviation from UIP emerging as consensus. In fact, some researchers now view the puzzles themselves as stylized facts, which recent “Dynamic Stochastic General Equilibrium” (DSGE) models should seek to replicate, see e.g. Smets and Wouters (2002), Lindé et al. (2004), Murchison et al. (2004) and Adolfson et al. (2008). However, as DSGE models have begun to dominate the field of applied macroeconomics and policymaking, it now seems more likely that the economic profession might eventually abandon the Dornbusch overshooting model, also in theory. This paper strongly cautions against allowing for exchange rate puzzles to develop into consensus for the following reason: although relying on sign restrictions is a useful way of testing the implications of alternative short term restrictions, this approach implies a weak form of identification that may produce weak results (Fry and Pagan, 2007). The main objection to this approach is that the identification scheme will be non-unique. Due to the weakness of information contained in the sign restrictions, there are many impulse responses that can satisfy each sign restriction. Drawing an inference with regard to the precise timing of a peak response in the exchange rate instead requires a strong form of information. This suggests that one should seek to identify VAR models by applying restrictions that ensure a unique identification while keeping the contemporaneous interaction between monetary policy and the exchange rate intact. Doing so, we find that the Dornbusch overshooting results hold after all. To be more precise, this paper suggests identification by restricting the long run multipliers of shocks. In particular, monetary policy shocks are assumed to have no long run effect on the level of the real exchange rate. In the short run, however, monetary policy is free to influence the exchange rate. Eventually though, the effect dies out and the real exchange rate returns to its initial level. This is a standard neutrality assumption that holds for a large class of models in the monetary policy literature (see Obstfeld, 1985 and Clarida and Gali, 1994). Once allowing for a contemporaneous relationship between the interest rate and the exchange rate, the remaining VAR can be identified using standard recursive zero restrictions on the impact matrix of shocks; assuming a lagged response in domestic variables (such as output and inflation) to monetary policy shocks. That monetary policy affects domestic variables with a lag, is consistent with the transmission mechanism of monetary policy emphasised in Svensson's (1997) theoretical set up. These restrictions are therefore less controversial, and studies identifying monetary policy without these restrictions have found qualitatively similar results, see for example Faust et al. (2004) and the references therein. Furthermore, the assumption of a delayed response in output and inflation combined with a long run neutrality restriction on the real exchange rate following a monetary policy surprise, are core assumptions underlying Dornbusch's overshooting model, which are consistent with NOEM implications ( Lane, 2001) and empirically realistic ( Rogoff, 2002). We impose the alternative identification strategy on four small open economies with floating exchange rates: Australia, Canada, New Zealand and Sweden, and the results are striking.4 Contrary to the findings of recent studies, we find that a contractionary monetary policy shock has a strong effect on the real exchange rate, which appreciates on impact. The maximum impact occurs within 1–2 quarters, and the exchange rate thereafter gradually depreciates back to baseline, consistent with the Dornbusch overshooting hypothesis and with few exceptions consistent with UIP. The rest of this paper is organised as follows: Section 2 discusses the VAR methodology used to identify monetary policy shocks; Section 3 presents the empirical results; Section 4 provides extensive robustness checks (focusing both on model specification and identifying restrictions); and Section 5 concludes.

Dornbusch's (1976) well known exchange rate overshooting is a central building block in international macroeconomics, stating that the nominal exchange rate immediately appreciates with the increase in nominal interest rates, in line with uncovered interest parity (UIP). When confronted with data, however, few empirical studies that analyse the effects of monetary policy shocks have found support for Dornbusch overshooting. Instead they have found that following a contractionary monetary policy shock, the real exchange rate either depreciates, or, if it appreciates, it does so for a prolonged period of up to 3 years, thereby giving a hump-shaped response that violates UIP. From a theoretical point of view, these results are surprising. Delayed appreciation after an interest rate hike may involve “money on the table”, as agents may benefit from both higher interest rates and the appreciation of the exchange rate. Yet, these results have been so pervasive that many recently developed DSGE models have sought to replicate the puzzles themselves, contributing to consensus on the matter of exchange rate puzzles. The majority of studies that quantify the effects of monetary policy shocks have used the vector autoregressive (VAR) approach. A major problem facing these studies is how to address the simultaneity of monetary policy and the exchange rate. Most of the studies of open economies place zero contemporaneous restrictions on the response of the systematic interest rate setting to an exchange rate shock, or vice versa. However, this is not consistent with established theory on either monetary policy or on exchange rate determination. Furthermore, Faust and Rogers (2003) have recently shown that the delayed overshooting feature of the open economy VAR is highly sensitive to this kind of restriction. VAR models of the open economy should therefore seek to identify monetary policy without restricting the contemporaneous response. This paper suggests an alternative identification that restricts the long run multipliers of the shocks, but with no restriction on the contemporaneous relationship between the interest rate and the real exchange rate. Identification is achieved by assuming that monetary policy shocks can have no long run effect on the level of the real exchange rate. This is a standard neutrality assumption that holds for a large class of models in the monetary policy literature. In the short run, however, monetary policy is free to influence the exchange rate. Allowing for full simultaneity between monetary policy and the exchange rate, we find striking results; Contrary to the recent “consensus”, a contractionary monetary policy shock has a strong effect on the exchange rate, which appreciates on impact. The maximal impact occurs almost immediately (within 1–2 quarters), and the exchange rate thereafter gradually depreciates back to baseline. This is consistent with the Dornbusch overshooting hypothesis. Furthermore, the ensuing movement of the exchange rate is with few exceptions consistent with UIP. Hence, we have found no evidence of the typical hump-shaped response found in the empirical literature (i.e. Eichenbaum and Evans, 1995). Instead we find renewed support for the view that policy shocks generate exchange rate responses consistent with UIP