Publications by Date

1984
Engel C, Frankel J. Why Interest Rates React to Money Announcements: An Explanation from the Foreign Exchange Market. Journal of Monetary Economics [Internet]. 1984;10 (1) :31-39. Publisher's VersionAbstract
When the Fed announces a money supply greater than had been expected, interest rates rise. Why? One explanation is that the market raises its estimate of the future rates of money growth and inflation, and bids up nominal interest rates. We offer contrary evidence: on such days the dollar appreciates, not depreciates. An alternative explanation is that the market perceives the change in the money stock as a transitory fluctuation that the Fed will reverse in the future. The anticipated future tightening raises today's real interest rate, causes a capital inflow, and appreciates the dollar, the result in fact observed.
engelf_whyinterestratesreact_to_moneyannouncements.pdf
Frankel J. The Theory of Trade in Middle Products: Extension. American Economic Review [Internet]. 1984. Publisher's Version
Frankel J. Tests of Monetary and Portfolio-Balance Models of Exchange Rate Determination. Exchange Rate Theory and Practice [Internet]. 1984. Publisher's Version
Frankel J, Engel C. Do Asset Demand Functions Optimize Over the Mean and Variance of Real Returns? A Six Currency Test. Journal of International Economics [Internet]. 1984;17 :309-323. Publisher's Version
Frankel J. The Yen/Dollar Agreement: Liberalizing Japanese Capital Markets. 9th ed. Washington, DC: MIT Press for Institute for International Economics; 1984.
1983
Frankel J. The Effect of Excessively-Elastic Expectations on Exchange Rate Volatility in the Dornbusch Overshooting Model. Journal of International Money and Finance. 1983;2 (1) :39-46.Abstract
Bilson has described the empirical finding that the forward exchange rate overestimates the speed of return to equilibrium as a finding of ‘excessive speculation’, and has drawn implications for the volatility of the exchange rate. The present paper pursues this tack within the sticky-price monetary model made famous by Dornbusch. It is shown theoretically that if the market overestimates the speed of adjustment, the degree of overshooting is reduced. In this sense ‘excessive speculation’ leads to reduced volatility.
Frankel J. Estimation of Portfolio-Balance Functions that are Mean-Variance Optimizing: The Mark and the Dollar . European Economic Review [Internet]. 1983;23 (3) :315-327. Publisher's VersionAbstract
This paper offers a way of efficiently estimating the parameters in demand functions for mark and dollar assets. The technique imposes the constraint that the parameters, rather than being determined arbitrarily, are based on investors' optimizing behavior regarding expected returns and variances. It dominates some previous empirical applications of finance theory in the respect that the expected returns are allowed to vary from period to period, which is a necessary feature of any macro model. The constraint that the parameters are based on mean-variance optimization is also tested, and not rejected.
Frankel J. Monetary and Portfolio-Balance Models of Exchange Rate Determination. In: Economic Interdependence and Flexible Exchange Rates. MIT Press ; 1983. Publisher's Version
1982
Frankel J. On the Franc. Annales de l'INSEE [Internet]. 1982;47-48. Publisher'sVersionAbstract

Six assumptions that any exchange rate theory must take into account are tested on French data: covered interest parity, rational expectations, exchange risk premium, political risk premium, money demand function and slow adjustment to purchasing power parity. The evidence is consistent with what has been found for other countries, with the important qualification that French capital controls require that interest parity be amended. There is a term analogous to a "tax" on foreign assets. The building blocks are then combined in various ways into three alternative exchange rate models: a stickyprice monetary model, protfolio-balance model and synthesis model.

Frankel J. The Mystery of the Multiplying Marks: A Modification of the Monetary Model. Review of Economics and Statistics [Internet]. 1982;LXIV (3). Publisher's VersionAbstract
The failure of Uncovered Interest Parity is usually attributed to the idea that risk makes domestic and foreign bonds imperfect substitutes in investors' portfolios.  If so, as in the portfolio balance model, the the foreign-domestic return differential should be related to the supplies of foreign and domestic bonds that must be held.  It isn't.
Frankel J. The 1807-1809 Embargo Against Great Britain. Journal of Economic History [Internet]. 1982;XLII (2). Publisher's VersionAbstract
The lack of success of the 1807–1809 Embargo by the United States has generally been attributed, first, to a lack of effective enforcement, and, second, to an inability to inflict greater economic damage on Great Britain than was suffered by the United States. This paper challenges both explanations. It is argued, first, that the Embargo did effectively reduce both countries to autarky. It is argued, second, that in autarky the relative price in Britain of agricultural products that had previously been imported rose by more than the relative price in the United States of manufactured goods that had previously been imported.
Frankel J. A Technique for Extracting a Measure of Expected Inflation from the Interest Rate Term Structure. Review of Economics and Statistics. 1982;64 (1) :135-142.Abstract
A long-short term spread is often used as a leading indicator of inflation of growth.  But every point along the yield curve offers information.  Thsi paper developed a formula for making use of the term structure along its entire length
Frankel J. In Search of the Exchange Risk Premium: A Six-Currency Test Assuming Mean-Variance Optimization. Journal of International Money and Finance [Internet]. 1982;1 :255-274. Publisher's Version
Frankel J. A Test of Perfect Substitutability in the Foreign Exchange Market. Southern Economic Journal [Internet]. 1982;48. Publisher's Version
1981
Frankel J. On the Mark: Reply. American Economic Review. 1981;71 (5).
1980
Frankel J. Tests of Rational Expectations in the Forward Exchange Market. Southern Economic Journal [Internet]. 1980;46 (4). Publisher's Version
1979
Frankel J. On the Mark: A Theory of Floating Exchange Rates Based on Real Interest Differentials. American Economic Review [Internet]. 1979;69 (4) :601-622. Publisher's Version
Frankel J. The Diversifiability of Exchange Risk. Journal of International Economics [Internet]. 1979;9 :379-393. Publisher's Version
1977
Frankel J, Abel A, Beleza M, Hill R, Krugman P. A Model of the Portugese Economy. Economia. 1977;1 (1).

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