Can fixed exchange rate regimes cause output divergence among member states? We show that such divergence is a long … calibrated to the euro area, the model implies a slowdown in the TFP growth rate of the euro area's periphery relative to its … core. An empirical analysis confirms that the periphery's higher structural wage inflation rate contributed to its lower …

interest rates, exchange rate growth, and inflation. We then decompose the Swiss long-term interest rate trend into various … drivers using an interest rate accounting framework. The decline in long-term interest rates since 1970 is mainly driven by a … lower than foreign ones. However, this Swiss "low interest rate island" has disappeared in recent years. We document a …

This study rationalizes the negative HKD-USD interest rate (HIBOR-LIBOR) differentials observed after the US interest … rate hike on December 17, 2015. Why do arbitragers not eliminate the differentials until parity? We first analyse two … practical concerns that are typical from the perspective of a carry trader: (1) the difference in borrowing rate and lending …

targeting, the interest rate is the main monetary policy tool for influencing activity and inflation, and there is little … agreement about the appropriate role of the exchange rate.The exchange rate is a more important monetary policy tool for …-targeting emerging economies generally have less flexible exchange rate arrangements and intervene more frequently in the foreign …

The European Central Bank (ECB) strives to maintain inflation at a 2% target rate, yet the Euro area's diverse … economies pose challenges to achieving this goal with a single nominal interest rate. Effective monetary policy transmission … hinges on synchronizing the Natural Rate of Interest (NRI) across constituent economies. This note investigates NRI …