Historically, real exchange rate variability has been higher under flexible than under fixed exchange rates. Two explanations have been put forward. The neo-Keynesian view focuses on the interaction of volatile nominal exchange rates with sticky prices. The neoclassical approach maintains the...

Traditionally, the IMF's Annual Report on Exchange Arrangements and Exchange Restrictions has been the main source of information about the exchange rate policies pursued by member countries. The classification contained therein has been used to document the evolution of exchange rate regimes...

Traditionally, the IMF's Annual Report on Exchange Arrangements and Exchange Restrictions has been the main source of information about the exchange rate policies pursued by member countries. The classification contained therein has been used to document the evolution of exchange rate regimes...

There has been considerable interest in recent years in the possibility of hardening the SDR, motivated by the desire for an international yardstick of monetary stability. This paper explores various ideas aimed at hardening the SDR in the light of the previous debate on the valuation of the...

This paper analyzes the decision by a government facing electoral uncertainty to implement structural reforms in the presence of fiscal restraints similar to the Stability and Growth Pact. To the extent that the reform package entails budgetary costs, the model shows that a fiscal pact erodes...

This paper investigates the effects of fixed versus flexible exchange rates on firms' location choices and on countries' specialization patterns. In a two-country, twodifferentiated-goods monetary model, uncertainty arises after wages are set and prices are optimally chosen. The paper shows that...

Analyses of the political economy of exchange-rate policy posit that firms and individuals in different sectors of the economy have distinct policy attitudes toward the level and the stability of the exchange rate. Most such approaches hypothesize that internationally exposed firms prefer more...

Under the assumption of no arbitrage, the credibility of an exchange rate target zone is tested by whether domestic interest rates fall within "rate-of-return bands" between the maximum and minimum home currency rate of return on a foreign investment in the absence of a devaluation. Under the...

This paper examines the credibility of the exchange rate policy pursued by the Belgian monetary authorities of pegging the Belgian franc to a narrow fluctuation band around the deutsche mark, in the context of the exchange rate mechanism of the European Monetary System. Simple interest rate...

Daily French and German interest rate changes since the Basle-Nyborg agreement of September 1987 are examined empirically. In particular, it is asked whether the shock associated with German unification altered the degree of leadership of German monetary policy in the exchange rate mechanism...