The paper critically considers the endogenous Optimum Currency Areas (or e-OCAs) theory, focussing initially on early studies having identified a relevant link between the creation of a monetary union and an upgrading of trade intensity between member countries, on the one hand, and the increase...

In this paper we investigate the skirmishes that the US dollar and the euro had from 2007 to 2011 and, in particular, the two distinct sharp falls that the single currency had in 2008 and 2010. We basically consider how impulses coming from domestic money markets impact on the USD/EUR exchange...

This paper provides a selective survey of some recent literature assessing exchange rate credibility through bayesian or nonhinear econometrjc frameworks. The empirical evidence from this literature suggests two main conclusions: one in retrospect, concerning the past experience of France in the...

This paper addresses an interesting theoretical intuition, originally put forward in De Grauwe (1989), according to which market efficiency should find stronger support in a pegged exchange rate regime rather than in a purely floating context. To this purpose, we extend to a selected group of...

The increased heterogeneity of the European market after the prospective joining of the acceding countries to EMU could imperil the latter’s stability. It is widely expected that following enlargement the optimality conditions of the eurozone will decrease, implying a more difficult...

The target zones literature has developed extensively after the seminal papers by Krugman (1987, 1988). The literature has followed two waves: in the first wave, following the original Krugman model, all the articles assumed a perfectly credible target zone and the absence of intramarginal...

This paper addresses an interesting theoretical intuition, originally put forward in De Grauwe (1989), according to which market efficiency should find stronger support in a pegged exchange rate regime rather than in a purely floating context. A cointegration-based empirical investigation on the...

Focusing on the 1992-93 crisis of the European Monetary System (Ems), I stress, in opposition with the conclusions reached by “escape clause” models, the role played by the availability of foreign reserves. In particular, I show the lack of credibility of the Bundesbank’s commitment to...

A key prediction of the target zone exchange rate model is that the exchange rate should be mean reverting within the band. This short note investigates this theoretical prediction in the case of the euro/Cyprus pound exchange rate. Although other target zone arrangements have been studied...

An attempt is made to verify the exchange rate regime that China has been following since 21 July 2005 when a policy shift was implemented, presumably taking China from a dollar peg to a basket peg. The results show that while a regime of simple and strict dollar peg has indeed been abandoned,...