Large shocks, such as natural disasters, are often found to have little or no effect on the equilibrium distribution of economic activity across space. Two apparently competing theoretical explanations for this phenomenon are the increasing returns theory and the locational fundamentals theory....

In this paper, we investigate whether foreign currency accounts help overcome credit constraints in developing countries. We analyze a novel bank-level data set from Nepal, where a steady inflow of remittances has contributed to foreign currency deposits on commercial bank balance sheets. In...

In this paper we analyze the effects of changes in peoples' beliefs about the timing of the exit from Quantitative Easing ("tapering") on asset prices. To quantify beliefs of market participants, we use data from Twitter, the social media application, covering the entire Twitter volume on...

The study presents an empirical strategy for determining global currency bloc equilibria. The procedure includes, first, a nested logit estimation of the combined determinants of currency regime and anchor currency choice; second, a test for a welfare-maximising regime decision, in which estimates...

Despite major recent advance in the literature on financial crises, the key role of central banks in financial crises is still not well understood. Our aim is to contribute to a better understanding of the dynamics of financial crises by explicitly modeling the strategic options of both traders...

The common perception in the literature is that current dividend yields are uninformative about future dividends, but contain some information about future stock returns. In this paper, we show that this finding reverses when looking at a broad panel of countries outside the U.S.. In particular,...

This paper provides a modelling framework for evaluating the exchange rate dynamics in target zone regime with undisclosed bands. We generalize the literature to allow for asymmetric one-sided regimes. Market participants' expectation formation about the undisclosed band change as they learn...

The paper scrutinizes the role of wages and capital flows for competitiveness in the new EU member states in the context of real convergence. For this purpose it extends the seminal Balassa-Samuelson model by international capital markets. The augmented Balassa-Samuelson model is linked to the...

This paper examines how high-frequency trading decisions of individual investors are influenced by past price changes. Specifically, we address the question as to whether decisions to open or close a position are different when investors already hold a position compared to when they don't. Based...

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....