The primary goal of the European Central Bank’s (ECB) monetary policy is to achieve price stability. Whereas during the 1980s and 1990s there was a rapid and strong convergence in terms of price differential among the Euro countries, particularly in those countries with higher inflation rates...

In 1976 Vaubel suggested using the variation of real exchange rates when evaluating the desirability of a monetary union within a group of currencies (Vaubel 1976). Currency uni cation is less desirable, the more often real exchange rate adjustments are needed. Ten years later, Mussa...

This paper revisits the trade-off between central bank independence and conservatism using a New Keynesian model with uncertainty about the central banker's output gap target. It is shown that when this uncertainty is high, the trade-off no longer holds. In this case, the optimal combination...

This paper analyses currency options for six Pacific states - Fiji, Papua New Guinea, Samoa, Solomon Islands, Tonga and Vanuatu - that issue their own currencies. Empirical estimates indicate that these states already stabilize their currencies against the US dollar because of their large and...

Bun and Klaassen (2007) investigate the impact of the introduction of Euro on bilateral trade. Accounting for deterministic trends in the residuals of the gravity equation they estimate an Euro effect of about 3%, smaller than previous estimates in the range of 5% to 40%. In this paper we...

Early warning systems (EWSs) are subject to restrictions that apply to exchange rates in general: fundamentals matter but their influence is small and unstable. Keeping this in mind, five lessons emerge : First, EWSs have robust forecasting power and thus help policy-makers to prevent crises....

In theory, the IMF could influence economic growth via several channels, among them advice to policy makers, money disbursed under its programs, and its conditionality. This paper tries to disentangle those effects empirically. Using panel data for 98 countries over the period 1970-2000 it...

We investigate whether temporary members of the UN Security Council receive favorable treatment from the IMF, using panel data for 191 countries over the period 1951 to 2004. Our results indicate a robust positive relationship between temporary UN Security Council membership and participation in...

The paper explores the interaction between debt crises and devaluation. Since the optimal level of devaluation in a crisis depends on the level of debt that has to be serviced, a default makes a devaluation less likely. Expected devaluation depends thus on expectations about default which is...

The paper analyzes the relation between institutional quality, such as corruption, in a country and its monetary regime. It is shown that a credibly fixed exchange rate to a low inflation country, like a currency board, can reduce corruption and improve the fiscal system. A monetary union,...