This paper extends the framework provided by Aksoy, De Grauwe, Dewachter (2000). We first provide an econometric analysis of the stabilising properties of the monetary policy in the EMU countries within an open economy framework and obtain optimal feedback rules for monetary policymaking. In a...

It is widely accepted that international trade is an important force transmitting business cycles from one country to another. Metaphors such as "when the U.S. sneezes, Europe catches a cold" are often invoked to illustrate the importance of these linkages. Recent empirical research has...

Monte Carlo simulations are used to explore the small-sample properties of a mean group and two pooled panel estimators of a regression coefficient when the regressor is I(1). We compare and contrast the effect of I(0) and I(1) errors and homogeneous and heterogeneous coefficients in a design...

This paper explores the phenomenon of lasting deviations of the exchange rate from its fundamental value in the foreign exchange market. Motivated by empirical observations a chartists-fundamentalists model is developed in which boundedly rational agents repeatedly choose between technical and...

"Despite the common view that exchange rate volatility will inevitably depress the volume of international trade by increasing the riskiness of trading activity, empirical researchers have not found clear support for this relationship, with results being characterised as insignificant or where...

Principal components of the residuals are proposed for analysing between-group dependence when estimating PPP equations in large-T, large-N panels. If this dependence arises because omitted variables are correlated with included variables, the appropriate response to between-group dependences...

In this paper, we show how to derive the spectra and cross-spectra of economic times series from an underlying econometric or VAR model. This allows us to conduct a proper frequency analysis of economic and financial variables on a reduced sample of data, without it being ruled out by large...