The literature on exchange rate misalignments is very extensive as well as the literature on exchange rate determinants. To our knowledge, however, no study has analyzed the determinants of exchange rate misalignments. As huge capital inflows have been pouring into emerging countries since the...

In this paper, we revisit the relationship between economic growth and exchange rate misalignments, especially undervaluations. In particular, we ask which countries benefit from undervaluations at most, and whether the impact of undervaluations on growth depends on institutional quality as...

Understanding differences in business cycle phenomena between Emerging Market Economies (EMEs) and industrialized countries has been at the center of recent research on macroeconomic fluctuations. The purpose of this paper is to investigate the importance of certain credit market imperfections...

Financial instability has increased for many economies in the face of greater capital mobility. Eliminating capital flows, especially portfolio investment flows, may reduce volatility, but it could also result in domestic capital constraints. To overcome this dilemma, policymakers may consider...

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...