In this paper we evaluate the predictive power of the three most popular equilibrium exchange rate concepts: Purchasing Power Parity (PPP), Behavioral Equilibrium Exchange Rate (BEER) and the Macroeconomic Balance (MB) approach. We show that there is a clear trade-off between storytelling and...

We build currency portfolios based on the paradigm that exchange rates slowly converge to their equilibrium to highlight three results. First, this property can be exploited to build profitable portfolios. Second, the slow pace of convergence at short-horizons is consistent with the evidence of...

This paper provides evidence on whether the creation of the euro has changed the way global turbulences affect euro area and other economies. Specifically, it considers the impact of global shocks on the competitiveness of individual euro area countries and assesses whether their responses to...

This paper uses data on currency options prices for the exchange rates of the three largest new EU member states Poland, Czech Republic and Hungary vis-à-vis the euro and the US dollar to estimate the risk-neutral density (RND) functions and the density interval bands. Analysing the RNDs, we...

This paper assesses the possible contemporaneous relationship between stock index prices, earnings and long-term government bond yields for a large number of countries and over a time period that spans several decades. In a cointegration framework, our analysis looks at three hypotheses. First,...

There is already a substantial literature documenting the fact that low yield currencies typically appreciate during times of global financial stress and behave as safe havens. The main objective of this paper is to find out what the fundamentals of safe haven currencies are. We analyse a large...

Previous assessments of nominal exchange rate determination, following Meese and Rogoff (1983) have focused upon a narrow set of models. Cheung et al. (2005) augmented the usual suspects with productivity based models, and “behavioral equilibrium exchange rate” models, and assessed...

We apply the Campbell-Shiller return decomposition to exchange rate returns and fundamentals in a stationary panel vector autoregression framework. The return decomposition is then used to analyse how different investor segments react to news as captured by the different return components. The...

This paper studies the role of long-term unemployment in the determination of prices and wages. Labor market theories such as insider-outsider models predict that this type of unemployed are less relevant in the wage formation process than the newly unemployed. This paper looks for evidence of...

In most OECD countries, we cannot reject up to three breaks in the mean of inflation: one break in the late 1960’s-early 1970’s, one in the early-mid 1980’s and another break in the early 1990’s. These breaks tend to be associated more often to breaks in the mean of nominal variables...