This paper develops a decision-theoretic approach to policy analysis. We argue that policy evaluation should be conducted on the basis of two factors: the policymaker's preferences, and the conditional distribution of the outcomes of interest given a policy and available information. From this...

In this paper we analyze whether common currency' countries that is, dollarized and independent currency union countries have outperformed countries that have a currency of their own. The paper is empirical and estimates jointly the probability of being a common currency country and outcome'...

This paper provides an historical perspective on reserve currency competition and on the prospects of the dollar as an international currency. It questions the conventional wisdom that competition for reserve-currency status is a winner-take-all game, showing that several currencies have often...

Financial contagion and Sudden Stops of capital inflows experienced in emerging-markets crises may originate in an explosive mix of lack of policy credibility and world capital market imperfections that afflict emerging economies with national currencies. Hence, this paper argues that abandoning...

This paper studies the fluctuations of foreign exchange reserves under a regime of credibly fixed exchange rates. The paper considers a variety of assumptions on the determinants of money demand and currency substitution

Currency substitution (CS) and financial adaptation are in general believed to increase the equilibrium rate of inflation. This result derives from a setup in which the government finances a certain amount of real resources through money printing and where CS reduces the base of the inflation...

The international monetary system has passed through a succession of phases characterized alternatively by the dominance of fixed and flexible exchange rates. How are these repeated shifts between fixed and flexible rate regimes to be understood? The present paper specifies and tests six...

The literature has not being able to identify clear-cut real effects of exchange-rate regimes on output growth. Similarly, no definitive view emerges from the literature in regard to the effects of open capital markets on macroeconomic performance. The paper attributes the failure of the...

This paper is concerned with the reasons why some currencies, such as the pound sterling and the U.S. dollar, have come to serve as "vehicles" for exchanges of other currencies. It develops a three-country model of payments equilibrium with transaction costs, and shows how one currency can...

Although currency invoicing in international trade transactions is central to the transmission of monetary policy, the forces motivating the choice of currency have long been debated. We introduce a model wherein agents involved in international trade can invoice in the exporter's currency, the...