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....

We develop an equilibrium model in which exchange rates, stock prices and capital flows are jointly determined under incomplete forex risk trading. Incomplete hedging of forex risk, documented for U.S. global mutual funds, has three important implications: 1) exchange rates are almost as...

ABSTRACT This study re-examines the exchange rate-monetary fundamentals link with in a panel data framework. Pure time series and pooled time series-based tests fail to find empirical support for monetary exchange rate models (Sarantis (1994) and Groen (2000)). Using recently developed Panel...

This paper shows how the institutional rules imposed on its signatories by the GATT created a strategic incentive for countries to liberalize gradually. Free trade can never be achieved if punishment for deviation from a trade agreement is limited to a 'withdrawal of equivalent concessions.'...

Since the collapse of the Bretton Woods system in the early 1970s, the choice of the exchange rate regime has been the subject of a lively debate in international finance. In this study, we investigate the determinants of three exchange rate regimes (fixed, flexible and intermediate). Our...

We develop a model of a small open economy with three types of nominal rigidities (domestic goods prices, imported goods prices and wages) and eight different structural shocks. We estimate the model's structural parameters using a maximum likelihood procedure and use it to compute...

I construct a micro-model to show that a currency crisis can spread from one country to another even when these countries are unrelated in terms of economic fundamentals and there is no capital linkage across countries through a common lender or an interbank market. The key to explaining...

This paper studies the implications of the presence of a large speculator like George Soros during a contagious currency crisis. The model proposes a new contagion channel and shows how a currency crisis can spread from one country to another even when these countries are totally unrelated in...

Many observers were surprised by the depreciation of the euro after its launch in 1999. Handicapped by a short sample, explanations tended to appeal to anecdotes and lessons learned from the experiences of other currencies. Now sample sizes are just becoming large enough to permit reasonable...

The paper applies a popular methodology of competing risks to the analysis of the timing and interaction between the Deutsche Mark/U.S. dollar transactions, quotes, and cancellations in the Reuters D2000-2 electronic brokerage system. Consistently with previous stock market studies, the bid-ask...