The paper identifies based on the monetary overinvestment theories by Wicksell (1898), Mises (1912) and Hayek (1929) monetary policy mistakes in large industrial countries issuing international currencies. It its argued that a neglect towards monetary policy reform in a world dominated by...

We develop a dual currency search model to study equilibrium currency exchange and the determination of nominal exchange rates. Agents hold portfolios consisting of two distinct currencies. We study equilibria in which the two currencies are identical and equilibria in which the two currencies...

This paper studies bank runs in a model with coexistence of fiat money and private money. When fiat money is the only medium of exchange, there exist a bank run equilibrium and an equilibrium that achieves the optimal risk sharing. In contrast, when private money is also a medium of exchange,...

Recently various exchange rate models capturing the dynamics during the transition from an exchange rate arrangement of floating rates into a currency union have been derived. Technically, these stochastic equilibrium models are diffusion processes which have to be estimated by discretely...

In this paper we present a critical overview of differnt methods of constructing an equilibrium exchange rate. The recent literature on purchasing power parity (PPP) indicates that on its own PPP is not a good vehicle for defining an equilibrium exchange rate. Rather, we argue that the latter...

In this paper we propose a generalisation of the noise trader transmission mechanism to examine the impact of central bank intervention on exchange rates. Within a heterogeneous expectations exchange rate model intervention operations are supposed to provide support to either chartist or...

Sterilized foreign exchange market interventions are commonly dismissed by economists as an ineffective policy instrument. Nevertheless many central banks operating under independently floating exchange rates regimes are often engaged in sales and purchases of foreign exchange in order to...

The inability to reconcile observed levels of foreign exchange rate volatility with predictions derived from rational expectations models represents one of the most persistent challenges in international finance. This paper shows that such excess volatility puzzles arise from informational...

We present a model of bilateral real exchange rate determination based on different theories that can be combined into a common statistical framework. Although eclectic, the approach is successfully used to shape a final specification which performs surprisingly well when out of sample exercises...

Dieses Arbeitspapier untersucht Erklärungen für das hohe Mass an Persistenz und Volatilität des realen Wechselkurses. Dabei wird dem Ansatz gefolgt, dass die Schwankungen des realen Wechselkurses zurückzuführen sind auf exogene Schocks in Interaktion mit trägen Güterpreisen. Der Fokus...