Using a panel of 54 countries between 1980 and 2013, we find empirical support for the view that changes in the fiscal policy stance (year-on-year change in the cyclically adjusted primary balance) have a significant positive correlation with inflation volatility. An increase in the volatility...

Using quarterly data for 10 Euro Area countries we assess the determinants of government bond yield spreads; compute bivariate time-varying coefficient models of each determinant; and use these estimates to explain economic volatility. We find that better fiscal positions or higher than expected...

I propose a new explanation for the failure of Uncovered Interest Parity (UIP) that can rationalize not only the classic UIP puzzle, but also the evidence that the puzzle reverses direction at longer horizons. In the model, excess currency returns arise as compensation for endogenous...

In this study, we have attempted a broad review of the literature examining the impact of exchange rate volatility on trade volume. We show that early estimates suggesting a significant increase in trade among countries in currency unions are flawed, and are due to a number of reasons related to...

We provide a theory on currency dynamics, capital flows and conditions for emerging market economy central bank asset purchases to leave room for manoeuvre for conventional monetary policy. Local-currency asset purchases ease financial conditions and boost banks’ foreign borrowing capacity....

This heterogeneous interacting agents model of a financial market is a generalization of the model proposed by Westerhoff (The Use of Agent-Based Financial Market Models to Test the Effectiveness of Regulatory Policies) by traders who are allowed to have different investment horizons as...

This agent-based financial market model is a generalization of the model of Westerhoff (The Use of Agent-Based Financial Market Models to Test the Effectiveness of Regulatory Policies) by traders who are allowed to have different investment horizons as introduced by Demary (Who Does a Currency...