This paper considers the effects of formation or new accession to a monetary union (MU) on itself (“ins”) and the outsiders (“outs”) as well. Since a MU inherently means a “large” entity, we construct a large country model to examine those effects in the context of economic growth....

Agents engage in a process of forecasting the exchange rate based on observations of macroeconomic fundamentals. Deviations in the realized exchange rate from agents’ forecasts determine fluctuations in components of the current and financial accounts of the balance of payments in a sample of...

This paper examines the monetary model of exchange rate determination for the US dollar exchange rates against the currencies of Canada, Japan, and the United Kingdom. In this paper, we utilize the cointegration technique for testing long-run relationship, and vector error correction model for...

We review the Feldstein-Horioka (1980) approach to the measurement of the degree of international capital mobility by the size of the saving-investment correlation; we conclude that it raises many problems. Instead, we employ Granger causality tests to measure capital mobility using quarterly...

Most empirical applications of the OCA approach based on asymmetric shocks have failed to account for the credibility aspects that play an important role in deciding to join the EMU from the EMS or the EMS-BIS. In this paper, we tackle this problem by relying on a regime switching approach that...

The East Asian currency crisis of 1997-98 has led to considerable interest on the interlinkages between foreign exchange markets in the Asian region. Implicit in the literature is the assumption that the currency crisis can be linked to close integration of the goods and capital markets of the...

The eurozone is the crown jewel in the process of European integration. This monetary zone includes the most advanced integration grouping of countries in the European Union. The eurozone has been expanding the number of its participants, a sign of success in any economic or political union....

Using data on UK manufacturing firms, we examine the effects of exchange rate uncertainty on firm decisions on export market entry and export intensity. The use of micro data and new measures of exchange rate uncertainty enable us to test for hysteresis effects in a new way and to test the...

The signalling channel suggests that central banks use sterilized interven - tions in the foreign exchange market to convey information about future mone - tary policy to the market. To date, this theory is not sufficiently supported by theoretical work that establishes the link between...

A classic argument in favor of a fixed exchange rate regime (ERR) has been the promotion of international trade between the pegging country and its base country. Results from previous literature point to a significant and highly positive effect of adopting a fixed ERR on bilateral trade between...