In this Paper, we examine long-run determinants of cross-country variation in reserve volatility for 30 emerging market economies from 1973-2000. Reserve holdings and openness are found to be the most important explanatory variables of reserve volatility. The empirical results are robust for a...

We use a simple model in which the expected returns in emerging markets depend on their systematic risk as measured by their beta relative to the world portfolio as well as on the level of integration in that market. The level of integration is a time-varying variable that depends on the market...

The development of government bond markets and, in particular, their currency composition have recently received much interest, partly because of their relation with financial crises. This Paper studies determinants of the size and currency composition of government bond markets for a panel of...

This Paper considers how the European Union, and more specifically the euro area, can contribute to international financial stability. It sets the issues in the broader framework of financial globalization and international capital mobility. Sections 1-3 discuss globalization, international...

We quantify the sources of risk in currency returns as a first step toward understanding the returns reported for the carry trade. To do this, we develop and estimate an empirical model of exchange rate dynamics using daily data for four currencies relative to the US dollar: the Australian...

This Paper empirically studies the effect of instrumental and institutional stabilization of the exchange rate on the integration of goods markets. An instrumental stabilization of the exchange rate is accomplished through intervention in the foreign exchange market, or by monetary policies. An...

This paper analyses the constraints European Union law places on the 1 January 1999 choices of irrevocably fixed conversion rates between the euro and the currencies of EMU members states. Current EU legislation, notably the Maastricht Treaty, requires that the bilateral currency conversion...

The paper provides SVAR estimates for four open economies: the UK, Canada, Sweden and Denmark, making explicit a monetary policy reaction function and taking account of exchange rate targeting practices. The object of the analysis is to examine the idea that an independent money and exchange...

High interest rates to defend the exchange rate signal that a government is committed to fixed exchange rates, but may also signal weak fundamentals. We test the effectiveness of the interest rate defense by disaggregating into the effects on future interest rates differentials, expectations of...

In the first decade of its existence the EMS passed through three phases of realignments: full accommodation, partial accommodation and zero accommodation of inflation differentials. To what extent, however, does the new freedom of capital movements within the EC rule out such gradual...