Starting in 2004, the Guyanese foreign exchange rate has been remarkably stable relative to earlier periods. This paper explores the reasons for the stability of the rate. First, the degree of concentration in the foreign exchange market has increased, thus making the task of moral suasion...

Using data for the Philippines, I develop and estimate a heterogeneous agent model to analyze the role of monetary policy in a small open economy subject to sizable remittance fluctuations. I include rule-of-thumb households with no access to financial markets and test whether remittances are...

Using data for the Philippines, I develop and estimate a heterogeneous agent model to analyze the role of monetary policy in a small open economy subject to sizable remittance fluctuations. I include rule-of-thumb households with no access to financial markets and test whether remittances are...

What could be the drivers of low real rates? What are the implications of the Zero Lower Bound for economic policy? To discuss these questions we introduce a full general equilibrium model of the world economy with a simple (2 period) intertemporal structure. The model is simple enough to allow...

After the breakdown of the Bretton Woods system, Austria adhered to an exchange rate policy of adjustably pegging the schilling to a basket of stable currencies. Over the years the basket changed according to the respective priorities of overall economic policy and eventually shrunk to a single...

What legal basis is there for retaliating against China’s exchange-rate policy? This column says that IMF rules are likely inadequate to rule against China, while its policy does not constitute a WTO-punishable export subsidy. It argues that exchange-rate conflicts should be handled by a...

Central banks that lack credibility often tie their exchange rate to that of a more credible partner in order to “import” credibility. We show in a small open economy model that a central bank that displays “limited credibility” can deliver significant improvements to a social welfare...

Abandoning an objective function with multiple targets and adopting single mandate can be an effective way for a central bank to overcome the classic time-inconsistency problem. We show that the choice of a particular single mandate depends on an economy's level of trade openness and the...

Determinants of trade flows have always attracted researchers. In this paper, we model monthly trade flows in India over January 2000 - December 2007 in a bid to gauge their responsiveness to exchange rate movements. Capital account and overall BOP surplus have led the Indian Rupee (INR) to...

Abandoning an objective function with multiple targets and adopting a single mandate can be an effective way for a central bank to overcome the classic time-inconsistency problem. We show that the choice of a particular single mandate depends on an economy's level of trade openness and the...