It is well known that the long-run viability of a fixed exchange rate regime imposes constraints on monetary policy. This paper shows that, in a model with forward-looking agents, short-run viability imposes a fiscal constraint. When policy change, which destroys long-run viability, also...

Following the debate on exchange rate stabilization within the ASEAN 3, this paper presents a new approach to the determination of real equilibrium exchange rates in the region based on a general equilibrium approach. Based on the real bilateral export and import flows across the region, this...

This working paper was written by Juan Carlos Martinez Oliva (Bank of Italy).In view of the debate on exchange rate stabilization in Asia, this paper introduces a new and original approach to the determination of equilibrium real exchange rates (ERER) across ASEAN+3. Existing literature usually...

We study the long-run relationship of real exchanges rates (RERs) among the ASEAN-5 countries by testing the theory of Generalized Purchasing Power Parity (G-PPP) from the new perspective of fractional cointegration. The long-run co-movements of the RERs are examined by applying a recent...

The study assesses the level of integration among the three Greater China economies (namely China, Hong Kong, and Taiwan) and examines the suitability of a Greater China currency union. Currently, the three economies have extensive trade and investment linkages. Our analyses show that these...

This working paper was written by Yin-wong Cheung (University of California, Santa Cruz) and Jude Yuen (University of California, Santa Cruz).The study assesses the level of integration among the three Greater China economies (namely China, Hong Kong, and Taiwan) and examines the suitability of...

This paper considers the effect of currency union on exchange rate volatility. At a theoretical level, a simple framework is developed for thinking about volatility and exchange rate arrangements and some inferences are drawn from it. Empirically, the interaction between currency areas and...

This paper investigates if the euro's effect on euro-area trade differs across trade sectors and across country pairs, and to what degree heterogeneity matters for estimating the aggregate euro effect. Time-varying latent variables, which are specific to each sector in each country pair, control...

This paper examines the interdependence and coordination of monetary and exchange rate policies among the G-3 countries over the period 1977 through 1993. The results in the paper suggest that the international monetary transmission mechanism is important and that, among the G-3, U.S. policies...

We provide empirical estimates of the risksharing and redistributive properties of fiscal equalization among the states of the German federation. Fiscal equalization serves as a mechanism to insure state budgets against asymmetric revenue shocks, but provides almost no insurance against regional...