Tony Zhang

Boston University
Questrom School of Business
595 Commonwealth Ave
Boston, MA 02115

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Institutional Affiliation: Boston University

NBER Working Papers and Publications

October 2016Currency Manipulation
with Tarek A. Hassan, Thomas M. Mertens: w22790
We propose a novel, risk-based transmission mechanism for the effects of currency manipulation: policies that systematically induce a country’s currency to appreciate in bad times lower its risk premium in international markets and, as a result, lower the country’s risk-free interest rate and increase domestic capital accumulation and wages. Currency manipulations by large countries also have external effects on foreign interest rates and capital accumulation. Applying this logic to policies that lower the variance of the bilateral exchange rate relative to some target country (“currency stabilization”), we find that a small economy stabilizing its exchange rate relative to a large economy increases domestic capital accumulation and wages. The size of this effect increases with the size of...
March 2016Not So Disconnected: Exchange Rates and the Capital Stock
with Tarek A. Hassan, Thomas M. Mertens
in NBER International Seminar on Macroeconomics 2015, Michael B. Devereux, Francesco Giavazzi, and Kenneth D. West, editors
August 2015Not so Disconnected: Exchange Rates and the Capital Stock
with Tarek Alexander Hassan, Thomas Mertens: w21445
We investigate the link between stochastic properties of exchange rates and differences in capital-output ratios across industrialized countries. To this end, we endogenize capital accumulation within a standard model of exchange rate determination with nontraded goods. The model predicts that currencies of countries that are more systemic for the world economy (countries that face particularly volatile shocks or account for a large share of world GDP) appreciate when the price of traded goods in word markets is high. These currencies are better hedges against consumption risk faced by international investors because they appreciate in "bad" states of the world. As a consequence, more systemic countries face a lower cost of capital and accumulate more capital per worker. We estimate our mo...

Published: Hassan, Tarek A. & Mertens, Thomas M. & Zhang, Tony, 2016. "Not so disconnected: Exchange rates and the capital stock," Journal of International Economics, Elsevier, vol. 99(S1), pages 43-57. citation courtesy of

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