Using data from more than 100 economies for the period of 1975 to 2005, we conduct an extensive empirical analysis of the determinants of international reserve holdings. Four groups of determinants, namely, traditional macro variables, financial variables, institutional variables, and dummy...

Previous findings of long-run purchasing power parity come mainly from data for industrial countries, raising the issue of whether the results suffer sample-selection bias and exaggerate the general relevance of parity reversion. This study uncovers substantial cross-country heterogeneity in the...

Daily data from the German and U.S. equity markets before and after the introduction of the Euro are used to study the effect of exchange rate regime choices on equity markets. It is found that, since the introduction of the Euro, the volatility and the persistence of the German stock index have...

Previous assessments of nominal exchange rate determination have focused upon a narrow set of models typically of the 1970 s vintage, including monetary and portfolio balance models. In this paper we re-assess the in-sample fit and out-of-sample prediction of a wider set of models that have been...

We analyze current account imbalances through the lens of the two largest surplus countries; China and Germany. We observe two striking patterns visible since the 2007/8 Global Financial Crisis. First, while China has been gradually reducing its current account surplus, Germany’s surplus has...

We investigate the empirical determinants of China's outward direct investment (ODI). It is found that China's investments in developed and developing countries are driven by different sets of factors. Subject to the differences between developed and developing countries, there is evidence that...

Assessing exchange rate misalignment is not an easy task. With reference to the debate on the value of China's currency, the renminbi (RMB), this article highlights a few challenges in properly assessing the extent of currency misalignment. The results derived from the fundamental equilibrium...

We study China's illicit capital flow and document a change in its pattern. Specifically, we observe that China's capital flight, especially the one measured by trade misinvoicing, exhibits a weakened response in the post-2007 period to the covered interest disparity, which is a theoretical...