While derivative financial instruments have made the hedging and exchange of risk more efficient, the recent crisis showed that they also pose a substantial threat to financial stability in times of systemic turmoil. Underlying much of this threat is the lack of transparent reporting in the...

A discussion of the rapidly increasing use of derivative financial instruments, contending that these contracts represent innovations in risk management, not in risk itself, and will lead to enhanced wealth and more efficient risk management without the need for special regulation or legislation...

A primer on how collateralized mortgage obligations (CMOs) work, looking at both their advantages and disadvantages and explaining how some seasoned market participants got into trouble by investing in these interest-rate-sensitive financial instruments.

An analysis of possible effects on the U.S. economy of rapid depreciation of the foreign-exchange value of the dollar, that includes discussion on interest rates, prices, real GNP, and potential problems for the Federal Reserve System.

U.S. firms are facing tough international competition, and the U.S. trade deficit has grown to a level that some find alarming. Why doesn't the United States respond by easing monetary policy to lower the dollar's exchange rate and reduce the price of U.S. goods in foreign markets? This...

China's recent devaluation and liberalization of its exchange-rate policies will, at best, have only a temporary impact on its trade competitiveness with the United States. The type of exchange-rate regime that a country adopts matters little for its long-term international competitiveness. In...

Since the early 1990s, international banks have been offering nondeliverable forward (NDF) contracts to clients who need to hedge exposures in currencies of emerging-market economies. Many also use the exchange rate on these contracts as a best guess of where the emerging-market currency is...

A nontechnical guide to exchange rates that discusses the role of inflation and monetary policy in determining exchange rate movements, uses balance-of-payments concepts to illustrate the economic role of the real exchange rate, and examines the crucial role of expectations.

An examination of proposals to improve the international monetary system by creating central exchange rates and a discussion of why such a policy might not be in the best interest of the United States.

An analysis of the wage, productivity, and competitive factors that might prevent Ohio manufacturers from getting full benefit from the sharp drop in the foreign-exchange value of the dollar.