Evidence suggests that developing countries are more concerned with stabilizing the nominal exchange rate than developed countries. Some papers show not only that nominal exchange rates are less volatile, but also that international reserves and domestic interest rates are significantly more...

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...

An understanding of volatility in stock markets is important for determining the cost of capital and for assessing investment and leverage decisions as volatility is synonymous with risk. Substantial changes in volatility of financial markets are capable of having significant negative effects on...

Abstract Recent financial crises showed that emerging countries are extremely vulnerable to sudden swings in international capital flows. In these countries, commonly, periods of relative tranquility, characterized by substantial capital inflows and real GDP growth, are followed by periods when...

This paper proposes a model encompassing alternative views of contagion by highlighting the different channels of transmission of financial crises in an unifying framework. We study investor behaviour when they are affected by external habit formation. It is shown how international portfolio...

By fixing the exchange rate, a country rules out the possibility of using the exchange rate to adjust to aggregate demand shocks. But adjustment may be enhanced if internal prices are more flexible. This paper asks whether this increase in price flexibility is likely to take place endogenously...

This paper presents a dynamic model for a small open economy with imperfect financial market. It provides a framework to analyze the role of credit constraints and debt denomination in the generation and amplification of macroeconomic instability in an open economy context. As in Bernanke and...

This paper uses the open economy structural VAR model developed in Buckle, Kim, Kirkham, McLellan and Sharma (2002) to evaluate the impact of monetary policy on New Zealand business cycles and inflation variability and the output/inflation variability trade-off. The model includes a...