We study empirically the relation between currency excess returns and macro uncertainty, measured as forecast dispersion, on a wide set of economic indicators. We find that investment currencies deliver low returns whereas funding currencies offer a hedge when current account uncertainty is...

This working paper is written by Pasquale Della Corte (Imperial College London) and Aleksejs Krecetovs (Imperial College London).We empirically study the relationship between currency excess returns and current account uncertainty, measured as forecast dispersion. We find that investment...

A two sector small open economy model developed by Corden (1991, 2002) is used to analyse the impact of sudden stops in capital inflows on an internal and external equilibrium and to explore the merits of disposing of the nominal exchange rate as policy tool in rectifying real exchange rate...

We extend the model by DeGrauwe and Grimaldi (2006, EER) by currency transaction taxes. This model explains the exchange rate behavior by the interaction of heterogeneous traders who display either trend chasing behavior or rely on a return of the exchange rate back to its arbitrage free...

This paper investigates the implications of alternative scale variables of money demand for the comparison of a flexible exchange rate regime with a monetary union in a NOEM setup. The welfare evaluation of exchange rate regimes depends on the exchange rate response under the flexible regime....

This paper analyzes institutional arrangements for exchange rate systems and reviews what we know. It looks at the foreign exchange market, different balance of payment situations in which countries find themselves and the necessary exchange rate adjustments. It studies the options that are...

This paper revisits Canada's pioneering experience with floating exchange rate over the period 19501962. It examines whether the floating rate was the best option for Canada in the 1950s by developing and estimating a New Keynesian small open economy model of the Canadian economy. The model is...

A narrowing of the U.S. current account deficit through exchange rate movements is likely to entail a substantial depreciation of the dollar, as stressed in research by Obstfeld and Rogoff. We assess how the adjustment is affected by the high degree of financial integration in the world economy....

Using a sample of emerging markets that are integrated into global bond markets, we analyze the collapse and recovery phase of output collapses that coincide with systemic sudden stops, defined as periods of skyrocketing aggregate bond spreads and large capital flow reversals. Our findings...

This paper revisits Canada's pioneering experience with floating exchange rate over the period 19501962. It examines whether the floating rate was the best option for Canada in the 1950s by developing and estimating a New Keynesian small open economy model of the Canadian economy. The model is...