In a recent paper Mercenier and Sekkat (1988) use a linear-quadratic model to examine the willingness of a monetary authority in a small open economy to target its exchange rate. Based on their empirical results, the authors conclude that the Bank of Canada has displayed a willingness to use the...

We document a robust and interesting relationship between the real domestic price of oil and real effective exchange rates for Germany, Japan and the United States. We also offer an explanation why the real oil price captures exogenous terms of trade shocks, and why such shocks could be the most...