The behaviour of the exchange rate under a floating exchange rate regime for a small open economy with perfect capital mobility may appear like a managed float or even a firmer peg. We present a canonical new neo-classical synthesis open economy model where the central bank follows a strategy...

Over the past decades, cross-border financial flows have increased in importance and have in many occasions exceeded the underlying current account positions. This phenomenon has been accompanied by an increase in the volume of international equity transactions that accentuate the role of...

This paper analyzes cooperation between sovereign national authorities in the supervision and regulation of a multinational bank. We take a political economy approach to regulation and assume that supervisors maximize the welfare of their own country. The communication between the supervisors is...

This Country Focus discusses the relation between public investment and economic growth in Poland. Theoretical and empirical work has shown that improvements in the quantity and quality of public infrastructure have a positive impact on growth in the medium and, possibly, in the long run. The...

Following several years of low growth Germany is presently enjoying a relatively strong recovery. With unemployment falling at record speed and fiscal consolidation progressing, the upswing is set to continue in spite of uncertainties surrounding the VAT increase of January 2007. This Country...

The Czech financial sector has changed dramatically since transition. In fifteen years, it has developed from a state-owned mono-bank into a privatised bank-based financial system with developing capital and private equity markets. This country focus analyses the development of the financial...

Since 1995 Germany has barely managed to grow by 1.2% annually, with growth over the last four years averaging only 0.6%. In 2005, growth will again be below1%. With these low growth rates Germany has clearly fallen behind all the other European countries. The German economy is suffering from a...

This paper presents evidence for structural differences in economic growth dynamics between the current EU and the central- and eastern European accession countries. Two important results emerge from the analysis. First, accession countries have posted higher average growth and wider output...