This paper presents a structural dynamic factor model of a small commodity-exporting economy using Canada as a representative case study. Combining large panel data sets of the global and Canadian economies, we first identify those demand and supply shocks that explain most of the volatility in...

We analyze the way in which Latin American countries have adjusted to commodity terms of trade (CTOT) shocks in the 1970–2007 period. Specifically, we investigate the degree to which the active management of international reserves and exchange rates impacted the transmission of international...

We examine the development of open macroeconomic policy choices among developing economies from the perspective of the powerful “trilemma” hypothesis. We construct an index of divergence of the three trilemma policy choices, and evaluate its patterns in recent decades. We find that the three...

This paper investigates the potential impacts of the degree of divergence in open macroeconomic policies in the context of the trilemma hypothesis. Using an index that measures the relative policy divergence among the three trilemma policy choices, namely monetary independence, exchange rate...

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...

This paper provides new empirical evidence about the relationship that may exist between real exchange rates and commodity prices in developing countries that are specialized in the export of a main primary commodity. It investigates how structural factors like the exchange rate regime, the...

This paper examines whether the monetary model is a reasonable framework for exchange rate movements in Central and Eastern European countries. We apply the methodology for non-stationary panels, which allows for cross-sectional dependence. We also choose the timespan of data free of high...

This paper focuses on the effects of global factors on the saving–investment relationship. We prove that, if investments and savings are affected by idiosyncratic and global components, they must be cointegrated to obtain reliable estimates of the saving-retention coefficient. When global...

Governments are confronted with the growing realization that they face fiscal limits on the size of debt and deficits relative to GDP. These fiscal limits invalidate Bohn's criterion for fiscal sustainability, which allows explosive debt relative to GDP, eventually violating any fiscal limit. We...

A notable feature of the empirical studies on uncovered interest parity (UIP) is that almost all published papers rely on the approximate form of UIP using substantially the same database of developed economies. It can, therefore, not be ruled out that the refusal of UIP condition is simply the...