According to the traditional 'optimum currency area' approach, the case for adopting a common currency is stronger if the countries are subject to relatively similar output shocks. This Paper takes a different approach and highlights the fact that high exchange rate volatility may as well signal...

Monetary policies of the ECB and US Fed can be characterised by Taylor rules, that is both central banks seem to be setting rates by taking into account the output gap and inflation. We also set up and tested Taylor rules which incorporate money growth and the euro-dollar exchange rate, thereby...