This paper analyzes the sustainability of fixed exchange rates by extending the Barro-Gordon framework to a fully dynamic context in which the level of a state variable (in this case debt) determines the payoffs available to the government at each point in time. The model yields the following...

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

The stability of the EMS depends crucially on realignment expectations of the market participants. In this paper we discuss how to measure such expectations and how to relate them to economic fundamentals, central bank reputation, and institutional arrangements of the EMS. We find the following...

Several papers study the effect of trust by using the answer to the World Values Survey (WVS) question quot;Generally speaking, would you say that most people can be trusted or that you can't be too careful in dealing with people?quot; to measure the level of trust. Glaeser et al. (2000)...