The markets for foreign exchange, energy and residential housing have all been strongly affected by the deregulation and expansion of the financial sector. As a result, they have begun to follow the logic of asset markets. This was especially marked in the case of the foreign exchange market...

In this paper we specify the basic set of economic criteria that any diffusion-driven interest rate or FX rate process must satisfy. We also develop the methodology that is implementable to test the validity of a proposed process insofar as it satisfies the basic criteria as well as the actual...

Previous empirical study on the effects of monetary policy shocks in small open economies has produced exchange rate responses that are inconsistent with existing open economy macroeconomic theory. We argue that a careful identification of monetary policy in an explicit open economy setting is...

We study financial fragility, exchange rate crises, and monetary policy in an open economy version of a Diamond-Dybvig model. The banking system, the exchange rate regime, and central bank credit policy are seen as parts of a mechanism intended to maximize social welfare; if the mechanism fails,...

Extant models of exchange rate behavior have typically relied on statistical rather than economic considerations. The approach has been to employ a variant of the generalized central limit theorem to develop tests for the models proposed. ; We propose a minimal set of simple economic...

No previous study has considered the intraday JPY/USD exchange rate responses to a broad set of comparable news surprises from both the U.S. and Japan. We attempt to fill this gap in the literature by investigating the effects of both U.S. and Japanese news surprises, measured as the difference...

Emerging market and developing economies (EMDEs) have experienced an extraordinary decline in inflation since the early 1970s. After peaking in 1974 at 17.3 percent, inflation in these economies declined to 3.5 percent in 2017. Despite a checkered history of managing inflation among many EMDEs,...

Romer and Romer (2004) propose a simple method to estimate monetary policy shocks using forecasts and real-time data. However, such data is not always (publicly) available, especially in a historical context. We explore the consequences of using revised data instead of the original forecast and...