This paper demonstrates how a currency board can become vulnerable to a crises in which the policymaker is forced to devalue. The model is built from two blocks: first, incomplete information about the devaluation cost faced by the policymaker; and second, unemployment persistence. Incomplete...

We analyze the international transmission of interest rates under pegged and non-pegged exchange rate regimes, demonstrating that transmission depends upon the informational properties of a base country`s interest rate change. We differentiate between interest rate movements which are...

This paper demonstrates how a currency board can become vulnerable to a crises in which the policymaker is forced to devalue. The model is built from two blocks: first, incomplete information about the devaluation cost faced by the policymaker; and second, unemployment persistence. Incomplete...

This paper explores the determinants of sovereign bond yields during the classical gold standard period (1872-1913). Using the Pooled Mean Group methodology, we find that the main benefit of the gold standard can be seen as a short-hand device that enhanced a country`s reputation in...

We analyse the costs of a monetary union in West Africa by means of asymmetric aggegate demand and aggregate supply shocks. Previous studies have estimated the shocks with the VAR model. We discuss the limits of this approach and apply a new technique based on the dynamic factor model. The...

We show that relaxing the assumption of CES preferences in monopolistic competition has surprising implications when trade is restricted.  Integrated and segmented markets behave differently, the latter typically exhibiting reciprocal dumping.  Globalization and lower trade costs have...

We introduce two new tools for relating preferences and demand to firm behavior and economic performance.  The "Demand Manifold" links the elasticity and convexity of an arbitrary demand function; the "Utility Manifold" links the elasticity and concavity of an arbitrary utility function. ...

We provide a general characterization of which firms will select alternative ways of serving a market.  If and only if firms' maximum profits are supermodular in production and market-access costs, more efficient firms will select into the activity with lower market-access costs.  Our result...

We show that the efficient allocation of production capacity can turn a competitive industry and downstream market into an imperfectly competitive one. Even though downstream firms have symmetric production technologies, the downstream industry structure will be symmmetric only if capacity is...

This paper examines monetary policy in a currency union whose member countries exhibit heterogneous rates of limited asset markets participation (LAMP).  As a result risk sharing among member countries is imperfect and the monetary transmission mechanism can differ across countries.  In the...