Tiny changes in the American monetary policy can have dramatic effects on the rest of the world because of dollar's double role of national and international currency. This is the Triffin dilemma. The paper shows how it works through three examples: price of commodities, dollarization, and the...

This paper draws from Japan's recent monetary experiment to examine the effects of an increase in the inflation target during a liquidity trap. We review Japanese data and examine through a VAR model how macroeconomic variables respond to an identified inflation target shock. We apply these...

In this paper, we extend the Taylor rule model of exchange rate determination by incorporating the liquidity yield on government bonds and investigate exchange rate predictability. We find that the liquidity yield on government bonds delivers additional predictive power to future exchange rate...

This paper examines the presence of asymmetric behavior in exchange rate pass-through (ERPT) to CPI inflation in 12 euro area (EA) countries. Using a class of nonlinear smooth transition models, the author tests for asymmetry with respect to the direction and the magnitude of exchange rate...

The paper employs a structural vector auto-regression (SVAR) along the lines of Blanchard and Quah (1989) and Clarida and Gali (1994) to identify the sources of changes in German international price competitiveness over the past 30 years. This leads to a separation of the driving forces of the...

This paper tackles the issue of cross-section dependence for the monetary exchange rate model in the presence of unobserved common factors using panel data from 1973 until 2007 for 19 OECD countries. Applying a principal component analysis we distinguish between common factors and idiosyncratic...

The economies of Russia, Ukraine, and Belarus have long been undergoing an uneven process of regional integration, but at the same time face the lasting effects of the 2008 Global Financial Crisis. This study examines different measures of Exchange Market Pressure (EMP), which captures currency...

Using a heterogeneous firm model with firm entry and endogenous markups, I study how the financial constraints of exporting firms affect exchange rate pass-through behaviors. I find that the financial constraints increase the degree of exchange rate pass-through.

When the interbank market risk premium soared during the financial crisis, it created a wedge between interest rates actually paid by private agents and the rapidly falling policy rates. Many central banks attempted to improve the situation by supplying liquidity to the domestic interbank...

This paper explores the influence of Taylor rule deviations on the Deutschmark-Dollar and Yen-Dollar real exchange rate. Taylor rule deviations occur if the short term interest rate persistently deviates from an interest rate path consistent with the Taylor rule. It uses the behavior rational...