Europe's contribution to the international financial system is a new currency, the euro. Economic and Monetary Union in Europe (EMU), of which the single currency is the manifestation, has emerged in the context of a complex process of interaction between globalisation and regional integration....

Testing the hypothesis that international equity market correlation increases in volatile times is a difficult exercise and misleading results have often been reported in the past because of a spurious relationship between correlation and volatility. This paper focuses on extreme correlation,...

This paper relates the volatility of the (trade-weighted) effective real exchange rate to the degree of trade openness of an economy. The theoretical part presents an intertemporal monetary model with nominal labour (factor) market rigidities. Both monetary and aggregate supply shocks are shown...

The paper analyzes foreign investment and asset prices in a context of uncertainty over future government policy. The model endogenizes the process of learning by foreign investors facing a potentially opportunistic government, which chooses strategically the timing of a policy reversal in order...

We examine the mean-reverting properties of real exchange rates, by comparing the unit root properties of a group of international real exchange rates with two groups of intra-national real exchange rates. Strikingly, we find that while the international real rates taken as a group are...

In this paper the short- and long-run movements of the Japanese yen-US dollar exchange rate are modelled for the recent floating period. The modern general-to-specific approach is used as our econometric framework. In contrast to some other exchange rate studies, we interpret multiple...

We use genetic programming techniques to identify optimal technical trading rules. We find strong evidence of economically significant out-of-sample excess returns to the rules for each of six exchange rates ($/DM, $/Yen, $/SF, $/£, DM/Yen, SF/£), over the period 1981–95. Some of the rules...

Models based on economic theory have serious problems at forecasting exchange rates better than simple univariate driftless random walk models, especially at short horizons. Multivariate time series models suffer from the same problem. In this paper, we propose to forecast exchange rates with a...

We examine the expected survival time of a unilateral exchange rate target zone, when constraints on monetary policy prevent the central bank from exclusively focusing on defending the target zone. In general, the width of the target zone has a negligible effect on the expected survival time,...

Many recent papers suggest that the basic flex-price target zone model does not perform well empirically. This paper derives some of the testable implications of a sticky-price target zone model in order to determine whether the assumption of perfect price flexibility explains the empirical...