This paper examines the appreciation of the dollar over the period 1980-85. The standard theories try to explain the increased demand for dollar assets by differential rates of return on bonds or by "safe-haven" arguments associated with the lower riskiness of United States assets. Neither of...

This paper analyses the effects of monetary shocks in the determination of exchange rates in economies where banks play a central role in providing finance for domestic investment and in international capital transactions. This is a situation that prevails in many countries, both developed and...

It is widely thought that neither the foreign exchange markets nor equity markets are efficient, in the sense that tests of the unbiasedness hypothesis and of the present value relationship, respectively, typically lead to rejection. Interest has therefore turned to whether a risk premium...

This paper argues that the crisis was an outcome of EMU: setting a common monetary policy for countries with different initial inflation rates. The crisis countries were those with high inflation rates which then had negative real interest rates and consequently over-borrowed. Current policy...

The theory of optimal currency areas, due to Mundell and McKinnon, has enjoyed a revival of interest in the wake of European discussions of monetary union. The basic theme of this old literature is that there are potential gains for stabilization policy in an independent exchange rate and money...

Since the establishment in 1979 of the Exchange Rate Mechanism of the EMS a number of countries, after entry, have experienced a substantial and persistent rise in their real exchange rate (the ratio of domestic to foreign prices). This paper explains this phenomenon in terms of a `peso problem'...

Using the recent EC Commission report `One Market, One Money' as a point of reference, we consider the merits of a single currency in Europe. The main benefit is the reduction in transaction costs, which the report estimates at 0.4% of European Community (EC) GDP (but much less in countries with...