Recent theoretical developments in exchange rate economics have led to important new insights into the functioning of the foreign exchange market. The simple models of the 1970s, which could not withstand empirical evaluation, have been succeeded by more complex models that draw on theoretical...

As economic advisor to the Bank of England for many years, C. A. E. Goodhart is uniquely positioned to assess the role of the central bank in the modern financial system. This book brings together twenty-one of his previously published articles dealing with the changing functions of central...

The paper models the links between financial fragility, asset markets and monetary policy. It is shown that central banks concern about the cost of financial disruption generates an asymmetric response, thus contributing to the creation of an asset price bubble. In an economy with a highly...