While the financial protection measures enacted by the ECB and the community of Eurozone members have calmed financial markets, they have left the competitiveness problem of the Eurozone’s southern countries and France unresolved. The paper compares price inflation before the crisis with the...

This paper demonstrates that all of the currency options available to an independent Scotland come with the price tag of an austerity programme to the tune of £40bn. This is due to the need to accumulate foreign exchange reserves. So called Plan A – being part of a formal monetary union –...

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...

Poland is obligated to adopt the euro after the fulfilment, inter alia, of the exchange rate criterion which requires entering the Exchange Rate Mechanism II (ERM II). The European Central Bank recommends that the ERM II central rate should reflect the best possible assessment of the equilibrium...

We study the renminbi (RMB) covered interest differential – an indicator of the effectiveness of capital controls. It is found that the differential is not shrinking over time and, in fact, appears larger after the global financial crisis than before. That is, capital controls in China are...

This paper examines the impact of exchange rate uncertainty on different components of portfolio flows, namely equity and bond flows, as well as the dynamic linkages between exchange rate volatility and the variability of these two types of flows. Specifically, a bivariate GARCH-BEKK-in-mean...

We evaluate the impact of the global financial crisis (GFC) and recent structural changes in the patterns of hoarding international reserves (IR). We confirm that the determinants of IR hoarding evolve with developments in the global economy. During the pre-GFC period of 1999-2006, gross saving...

Since the breakdown of the Bretton Woods System diverging current account positions in Europe have prevailed. While the Southern and Western European countries have tended to run current account deficits, the current accounts of the Central and Northern European countries, in particular Germany,...

The European sovereign debt crisis revived the discussion concerning the pros and cons of exchange rate adjustment in the face of asymmetric shocks. Exit from the euro area is to regain rapidly international competitiveness. Exchange rate stability with structural reforms could be beneficial for...

Using the new unit root test by Phillips et al. (2011) we show that the Target balances of the German Bundesbank have been exploding from the beginning of 2009 to the beginning of 2013. By implementing a full-allotment policy and reducing the required minimum quality of collaterals in October...