Absence of arbitrage conditions impose important restrictions on the dynamics of bond and exchange rate returns. It can be shown that the exchange rate serves to convert prices of international undiversifiable risks from one currency to another. Put differently, arbitrage ensures that risk...

In this paper we assess the effects of monetary unification in Europe on the pricing behavior in financial markets and more in particular on excess returns. We use the standard IAPT framework to analyze the role of the exchange rate in separating excess return pricing accross European countries....

In this paper we assess the effects of monetary unification in Europe on the pricing behavior in financial markets and more in particular on excess returns. We use the standard IAPT framework to analyze the role of the exchange rate in separating excess return pricing accross European countries....

This paper presents an essentially affine model of the term structure of interest rates making use of macroeconomic factors and their long-run expectations. The model extends the approach pioneered by Kozicki and Tinsley (2001) by modelling consistently long-run inflation expectations...

This paper studies the relationship between the probability of devaluation of the Brazilian real and the fundamentals of the economy for the period 1995-1998. We use a model of a fixed exchange rate system that allows for multiple equilibria and, therefore, makes possible the identification of...

This paper uses reprojection to develop a benchmark to assess ECB monetary policy since January 1999, the start of EMU. We first estimate an essentially affine term structure model for the German SWAP yield curve between 1987:04-1998:12. The German monetary policy is then reprojected onto the...

The topic covered in this paper is the performance of different monetary policy rules thought to be used as a guideline in practical policymaking. In this respect, different rules are estimated using alternative econometrics techniques. A comparative analysis based on the ability of the rules in...

Multinational companies and national governments pay considerable attention to labor costs and labor productivity differentials across countries. This paper analyzes total and unit labor differentials for a group of European and non-European countries in the 1960-1998 period. It deals with (i)...

The increased mobility of capital of the last few decades creates new challenges for the macroeconomic policies of the nation-states. In this paper we analyse some of these challenges. Contrary to what is often alleged, increased capital mobility does not necessarily increase the need for...

We present and estimate a parsimonious multi-factor affine term structure model for joint bond markets. We extend the standard affine models by focusing on joint markets and by incorporating the exchange rate dynamics in the estimation procedure. Estimation is done by means of a Kalman filter...