This paper examines the impact of trade costs on real exchange rate volatil- ity. We model two channels endogenously in a Ricardian framework: (i) non- tradability and (ii) heterogeneous suppliers of traded goods. The ¯rst channel is examined by constructing a two-country Ricardian model of...

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 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...

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...

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 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...

This paper examines linkage of real interest rates for a group of selected countries in East Asia. The countries under study include Japan, Korea, Singapore, Malaysia and Thailand. The long run relationship is tested and estimated using the conitegration analysis. We also have conducted the...

The importance of currency and maturity mismatches in the debt structure of emerging markets is an issue that can hardly be overemphasized. Yet, while many papers have explained how imbalances in the asset and liability structure of emerging markets can cause currency and financial crises, the...

A simple two-country model of international trade under uncertainty is considered, where investors choose uncertain projects depending on interest rates, with high rates leading to risky projects. If investment is financed by bond markets, there can be asymmetric equilibria which can be Pareto...

An important puzzle in international macroeconomics is the exchange rate disconnect puzzle. Based on recent empirical literature by Mussa (1986), Baxter and Stockman (1989), and Flood and Rose (1995), high exchange rate volatility under floating rates appear not to be related to the high...