This paper develops a simple two-country, two-good model, in which the real exchange rate, stock and bond prices are jointly determined. The model predicts that stock market prices are correlated internationally even though their dividend processes are independent, providing a theoretical...

We examine Granger causality among the exchange rates of eight East Asian economies prior to the Asian crisis. We adopt as our general model Engle and Gau’s (1997) “official band†model, and use daily bilateral US dollar exchange rate data during January 1991-July 1997. Our...

This paper examines the role of monetary policy in the presence of endogenous time preference. The framework in which this issue is addressed is a monetary model with cash-in-advance constraints and an additional trading friction that is typical of the class of “liquidity models†of...

This paper is an attempt to decompose the average transactions velocity of money into two or more individual velocities. When the economy-wide velocity is expressed as a weighted average of two disaggregated velocities, this provides an equation with two unknowns. The additional equation can be...

I explore alternative central bank credit policies in a theoretical model where (i) money is necessary as a means of payment, (ii) there is a shortage of liquidity that a central bank addresses through the extension of credit, (iii) money is necessary to repay debts, and (iv) the incentives to...

This paper investigates causes of the recent sharp decline in the money multiplier in Japan from the bank side. Two candidates for the cause are examined: the first is the worsening of the banks’ financial soundness, and the second is the zero interest rate policy. Using panel data of...

This paper surveys the postwar evolution of Bank of Japan (BOJ) monetary policy. Using both qualitative and quantitative data, we describe the changes in the money supply process in response to changing institutional constraints. We focus on the transition from quantitative to qualitative...

We analyze the issue of the impact of multiple breaks on monetary neutrality results, using annual data on real output and monetary aggregates for Argentina (1884-1996), Australia (1870-1997), Brazil (1912-1995), Canada (1870-2001), Italy (1870-1997), Mexico (1932-2000), Sweeden (1871-1988), and...

This paper shows that the Mexican experience from 1945 to 2002 is, like the German hyperinflation period, a unique monetary ``natural experiment,'' where fundamental relationships, like money demand, PPP and the monetary model of exchange rate determination can be analyzed with unparalleled...

Empirical evidence shows that macroeconomic fundamentals have little explana-tory power for nominal exchange rates. On the other hand, the recent “microstruc-ture approach to exchange rates” has shown that most exchange rate volatility at short to medium horizons is related to order flows....