Both the literature and new empirical evidence show that exchange rate regimes differ primarily by the noisiness of the exchange rate, not by measurable macroeconomic fundamentals. This motivates a theoretical analysis of exchange rate regimes with noise traders. The presence of noise traders...

Exchange rate regimes differ primarily by the activity of the exchange rate, not observable macroeconomic ‘fundamentals’. Fixed exchange rates are typically stable and floating exchange rates are volatile, but macro phenomena are regime-independent. Fundamentals only seem to be relevant for...

Gravity-based cross-sectional evidence indicates that currency unions stimulate trade; cross-sectional evidence indicates that trade stimulates output. This paper estimates the effect that currency union has, via trade, on output per capita. We use economic and geographic data for over 200...

Fixed exchange rates are less volatile than floating rates. The volatility of macroeconomic variables, such as money and output, does not change very much across exchange rate regimes, however. This suggests that exchange rate models based only on macroeconomic fundamentals are unlikely to be...