An often heard view is that exchange rate variability will decrease for a country that joins the EMU. This is not necessarily true. Both real and nominal exchange rate variability increase under certain circumstances when asymmetric demand shocks occur inside or outside the union. These results...

The uncovered interest rate parity condition lies at the heart of the "impossible trinity", stating that the three objectives of fixed exchange rates, free capital flows, and independent monetary policy cannot be pursued simultaneously. We argue that although monetary unification does indeed...

Choosing an exchange-rate regime is largely a matter of choosing the variables that will bear the brunt of adjustment to shocks and disturbances. Floating rates, supported by inflation-targeting regimes of varying degrees of transparency, have dominated currency arrangements in North America,...

Choosing an exchange-rate regime is largely a matter of choosing the variables that will bear the brunt of adjustment to shocks and disturbances. Floating rates, supported by inflation-targeting regimes of varying degrees of transparency, have dominated currency arrangements in North America,...

On February 24-25, 2006 an international workshop on “Regional and International Currency Arrangements” was held in Vienna. It was co-sponsored by the Oesterreichische Nationalbank and the Bank of Greece, and jointly organized by Eduard Hochreiter and George Tavlas. Academic economists and...

Candidate countries of central and eastern Europe (CEECs) are suppose to join the EU in 2004, June, which imply that they will face important challenges in the conduct of macroeconomic policy, in order to be able to enter the ERM-II system and eventually enter the EMU (European Monetary Union)....

We study fiscal policy in Denmark in the period 2004-2012 and compare the actual policy to counterfactual, rule-based alternatives. Given Denmark's fixed exchange rate towards the euro, it is the job of fiscal policymakers to stabilise fluctuations in output and inflation. However, we find that...

In this paper, we assess the equilibrium value of the Mauritian rupee in 2006-07 and over the medium run using two structural models. First, we derive a current account-based measure of the exchange rate equilibrium using the macroeconomic balance approach. Second, we estimate a reduced-form...

Evidence suggests there is a strong tendency among states to choose fixed exchange rates. Yet he interpretation of fixed exchange rates as a monetary policy rule remains unconvincing. Adopting an endogenous policy perspective, this paper argues that political-support maximizing governments...