This paper studies welfare gains from disinflation in the presence of currency substitution. A distinctive small open economy model with currency substitution and intermediated working capital is constructed for this objective. It is found that welfare gains from disinflation are higher when the...

We present and study the properties of a sticky information exchange rate model where consumers and producers update their information sets infrequently. We find that introducing inattentive consumers has important implications. Through a mechanism resembling the limited participation models, we...

Exploring the determinants and dynamics of the current account balance is one of the priorities of academic literature and policy circles. Although the effects of structural variables are deeply analyzed, a lesser attention has been paid to the impact of financial variables. Drawing on standard...

This paper analyzes the dynamics of risk premia, real exchange rates and portfolio movements in a two-country, two-good, two-bond model. We use an asymmetric set-up in the model, where one of the countries is emerging and the other one is developed and both countries issue bonds in domestic...

The aim of this study is to show that there exists a common movement among the currencies of emerging market economies that implemented the exible exchange rate regime after 2000. Also, we examine if this common movement is closely related to financial markets and some macroeconomic fundamentals...

We examine central bank intervention in foreign exchange markets using a dynamic censored regression model. We allow the amount of purchase and sale interventions to depend nonlinearly upon lagged values of intervention and on measures of disorderly foreign exchange markets. Using data for the...

We analyze the global imbalances and the required adjustments for rebalancing in current accounts and real exchange rates. We set up a two-country two-sector model for the US-China with two asymmetries. First, we assume that the size of China initially is one third of the US but its size becomes...

This paper analyzes the transmission process of monetary policy in a closed-economy New Keynesian model with monopolistic banking, credit market imperfections, and a cost channel. Lending rates incorporate a risk premium, which depends on firms’ net worth and cyclical output. The supply of...

Analyzing macroeconomic impacts of oil price changes requires first to investigate different sources of these changes and their distinct effects. Kilian (2009) analyzes the effects of an oil supply shock, an aggregate demand shock, and a precautionary oil demand shock. The paper’s aim is to...