In this paper we analyse the behaviour of the bilateral exchange rates that were converted into euros on 1 January 1999. Using a model of stochastic regime switching we study the effects of future conversion on current exchange-rate dynamics. We find that exchange rates are to a large extent...

The effectiveness of alternative loss functions assigned to the common central bank of a monetary union is studied. The alternative policy objectives are a function of the degree of aggregation of decision variables. We consider, respectively, the policy based on the union-wide aggregates and...

In this paper we solve a particular type of stochastic process switching problem where the terminal date is fixed but the terminal price may depend on past prices. We apply this framework to the effect of various conversion modalities currently discussed on exchange rate dynamics in the...