In general, individuals will be interested in consumption of goods with “original”prices denominated in various currencies. Traditional risk management is nominally orientedand typically neglects this differentiated consumption preferences of investors. We outline therelevance of a consumption...

This paper is about contagion and interdependence among Central European economies. It investigates the extent to which country-specific shocks spread across these countries beyond the normal channels of interdependence, taking into account common external shocks. To model such shocks, we make...

The paper analyzes the long-run performance of dynamic investment strategies based on fixed-mix portfolio rules. Such rules prescribe rebalancing the portfolio by transferring funds between its positions according to fixed (timeindependent) proportions. The focus is on asset markets where prices...

This paper analyses mutual causalities between crude oil price and euro / US dollar exchange rate. Instead of focusing on long-run macroeconomic linkages like the bulk of therelevant literature, the present approach takes a financial markets perspective using daily data. The fast-running...

This paper demonstrates effects of economic convergence processes on the foreign exchange behaviour in a monetary modelling approach. Since the exchange rate represents the relative price of two currencies, commonness of stochastic trends between the fundamental determinants of supply and demand...

This paper investigates the capital market relations between Euroland and the USA from 1990 until 2006. Formally based on the uncovered interest rate parity (UIP), backward recursive estimations establish a long-run equilibrium between European and US government bond yields. Since the mid-1990s...

This paper presents a behavioral finance model of the exchange rate. Agents forecast theexchange rate by means of very simple rules. They can choose between three groups offorecasting rules: fundamentalist, extrapolative and momentum rules. Agents using afundamentalist rule are not able to...

Past empirical research on monetary policy in open economies has found evidence of the ’delayed overshooting’, the ’forward discount’ and the ’exchange rate’ puzzles. We revisit the effects of monetary policy on exchange rates by applying Uhlig’s (2005) identification procedure that...

Our goal in this project is to gain a better empirical understanding of the internationalfinancial implications of currency movements. To this end, we construct a databaseof international currency exposures for a large panel of countries over 1990-2004.We show that trade-weighted exchange rate...

Though unambiguously outperforming all other ¯nancial markets in terms of liquidity,foreign exchange trading is still performed in opaque and decentralized markets. In par-ticular, the two-tier market structure consisting of a customer segment and an interdealersegment to which only market...