We investigate the effects of Central Bank interventions which are designed to smooth exchange rate volatility but are not aimed at a particular trend level. We present a model in which the intervention flow is a non-linear mapping of the market order flow. Simulations show that small daily...

This paper examines spillover and spillback effects of unconventional monetary policies conducted by the European Central Bank (ECB) and Swiss National Bank (SNB) on the exchange rate's distribution. The empirical setup examines the price response of EURCHF risk reversal to a change in ECB and...

This paper analyses the impact of central bank interven-tions in the inflation targeting regime. The results of empirical stud-ies in this paper show if there is a shock of the exchange rate, which would lead to depreciation of the exchange rate, a central bank may decide to mush instability on...

This paper presents a rule for foreign exchange interventions (FXI), designed to preserve financial stability in floating exchange rate arrangements. The FXI rule addresses a market failure: the absence of hedging solution for tail exchange rate risk in the market (i.e. high volatility). Market...

This study aims to test the efficiency of the Korean foreign exchange market and examine its determinants through several well-established methodologies based on the forward rate unbiasedness hypothesis and covered interest rate parity. The empirical findings indicate that the currency market...

The dynamic effects of ECB announcements, disentangled into pure monetary policy and central bank information shocks, on the euro (EUR) exchange rate are examined using a Bayesian Proxy Vector Autoregressive (VAR) model fed with high-frequency data. Contractionary monetary policy shocks result...

The likely extension of the euro area has triggered a debate on the organization of the ECB, in particular on the apparent mismatch between relative economic size and voting rights in the Council. We present a simple model of optimal representation in a federal central bank addressing this...

We consider the political economy of a monetary union wheremember governments attempt to influence the policy of the commoncentral bank. Modeling this as a common agency with incentivecontracts, we show that if incentives are all that matters for the bank,the equilibrium implements a weighted...

A two-country general equilibrium model with large wage setters and conservative monetary authorities is employed to investigate the welfare implications of three international monetary regimes: i) non-cooperative, ii) cooperative, and iii) monetary union. The analysis shows that the unions'...

Central bank or International Monetary Fund lending should be regarded as a line of credit, analogous to private line-of-credit products. Contractual provisions in private line-of-credit arrangements are designed to control managerial moral hazard and provide a means for profit-maximizing...