We use the Kalman filter to estimate the structure of the secret currency basket of the renminbi based on daily data between 2005 and 2009. The currency weights of selected currencies are modeled as stochastic processes (random walks). The official announcement of the new exchange rate regime in...

This paper sets up a general oligopolistic equilibrium model with two countries that differ in the centralization of union wage setting. Being interested in the consequences of openness, we show that, in the short-run, trade increases welfare and employment in both locations, and it raises...

In the current debate on the reasons and implications of the Greek and Irish euro crisis, the intra-European current account imbalances have gained rising attention. Whereas Greece and Ireland struggle for austerity in private and public spending, Germany is urged to reduce its current account...

The paper analyzes the relation between institutional quality, such as corruption, in a country and its monetary regime. It is shown that a credibly fixed exchange rate to a low inflation country, like a currency board, can reduce corruption and improve the fiscal system. A monetary union,...

Due to buoyant capital inflows East Asian central banks with exchange rate targets accumulate foreign reserves and thereby increase surplus liquidity. East Asian central banks with more flexible exchange rate regimes also face surplus liquidity that mainly emanates from past accumulation of...

The prospect of creating a currency union consisting of China, Japan, and Korea is evaluated using output data. After a brief discussion on the interactions between the three countries, the study investigates whether these three countries have common synchronous business cycles, which are...

One argument for floating the Chinese renminbi (RMB) is to insulate China’s monetary policy from the US effect. However, we note that both theoretical considerations and empirical results do not offer a definite answer on the link between exchange rate arrangement and policy dependence. We...

After the eastern enlargement of the European Union due to increasing labor market integration, wage determination and monetary integration in Central and Eastern Europe have become key issues in European economic policy making. Based on the Scandinavian model of wage adjustment by Lindbeck...

The paper scrutinizes the role of wages and capital flows for competitiveness in the new EU member states in the context of real convergence. For this purpose it extends the seminal Balassa-Samuelson model by international capital markets. The augmented Balassa-Samuelson model is linked to the...

Standard economic models predict that the choice of an exchange rate regime has important implications for the interdependency of national monetary policies, which is sometimes measured by the degree of inflation transmission across borders. In this paper, we examine how inflation rates in two...