We tackle two questions in this paper: In the sovereign debt crisis, what moves the euro area inflation outlook and has the firm anchoring of medium to long-term inflation expectations been touched? Deriving densities from a new data set on options on the euro area harmonized index of consumer...

This paper re-investigates the implications of monetary policy rules on changes in exchange rate, in a risk-adjusted, uncovered interest parity model with unrestricted parameters, emphasizing the importance of modeling market expectations of monetary policy. I use consensus forecasts as a proxy...

We argue that a higher share of the private sector in a country's external debt raises the incentive to stabilize the exchange rate. We present a simple model in which exchange rate volatility does not affect agents' welfare if all the debt is incurred by the government. Once we introduce...

In this paper, we present a new approach to measuring interest rate risk for insurers within the Swiss Solvency Test, which overcomes the shortcomings of the standard model. The standard model of the Swiss Solvency Test is based on more interest rate risk factors than are actually needed to...

The correlation between stock markets and interest rates has been discussed in numerous studies in the past, with differing results in terms of strength and direction of the relationship. This paper uses models of the multivariate GARCH type which allow for time-variability and regime changes in...

This paper uses sovereign CDS spread changes and their volatilities as a proxy for the informational efficiency of the sovereign markets and persistency of country risks. Specifically, we apply semi-parametric and parametric methods to the sovereign CDSs of 10 eurozone countries to test the...

We propose a novel, multilaterally consistent productivity approach-based indicator to assess the international price competitiveness of 57 industrialized and emerging economies. It is designed to be a useful assessment tool for monetary policy authorities and, thereby, differs from previously...

Foreign exchange rates and capital movements are expected to be closely related to each other as international capital markets become more and more integrated. To account for this fact we construct an index of real effective exchange rates as a weighted average of cross-country asset price...

We estimate the process underlying the pricing of American options by using higher-order lattices combined with a multigrid method. This paper also tests whether the risk-neutral densities given from American options provide a good forecasting tool. We use a nonparametric test of the densities...

In this paper we provide evidence for Evans and Lyons' (2005b) model of an information aggregation process in FX markets using a German bank's end-user order flow from 2002 to 2003. Though customer order flow is unambiguously the vehicle incorporating non-public information into exchange rates...