In this paper, we analyze the relation between interest rate targets and money supply in a (bubble-free) rational expectations equilibrium of a standard cash-in-advance model. We examine contingent monetary injections aimed to implement interest rate sequences that satisfy interest rate target...

This paper documents a new stylized fact of the greater macroeconomic stability of the U.S. economy over the last two decades. Using 131 monthly time series, three popular statistical methods and the forecasts of the Federal Reserve’s Greenbook and the Survey of Professional Forecasters, we...

Since the introduction of the euro in January 1999, exchange rate stability at the periphery of the euro area is growing. The paper investigates the impact of exchange rate stability on growth for a sample of 41 mostly small open economies at the EMU periphery. It identifies international trade,...

The enlargement of the European monetary union to include the accession countries (ACs) will not lead to higher average inflation in the enlarged euro area, but only to inflation redistribution across countries if continuity of the monetary policy framework is preserved. In the short term,...

This paper discusses the choice of an optimal external anchor for oil exporting economies, using optimum currency area criteria and simulations of a simple model of a small open economy pegging to a basket of two currencies. Oil exporting countries - in particular those of the Gulf Cooperation...

We show that the composition of imports has important implications for the optimal volatility of the exchange rate. Using input-output data for 25 countries we document substantial differences in the import and non-tradable content of final demand components, and in the role played by imported...

This paper shows that the credibility gain from permanently committing to a fixed exchange rate by joining the European Monetary Union can outweigh the loss from giving up independent monetary policy. When the central bank enjoys only limited credibility a pegged exchange rate regime yields a...

This paper analyses the impact of the shift away from a US dollar focus of systemically important emerging market economies (EMEs) on configurations between the US dollar, the euro and the yen. Given the difficulty that fixed or managed US dollar exchange rate regimes remain pervasive and...

This paper estimates export and import price equations for 41 countries –including 28 emerging market economies. Further, it relates the estimated elasticities to structural factors and tests for statistical breaks in the relation between trade prices and exchange rates. Results indicate that...

The paper analyses the trade-off between exchange rate flexibility and monetary policy autonomy. It tests empirically the 'Possible Duality' hypothesis, i.e. whether countries with more flexible currency regimes are indeed able to exert more monetary policy autonomy than those with less flexible...