The New Keynesian DSGE literature has come to the consensus that, from the perspective of business cycle stabilization, countries are worse off in terms of welfare by forming a monetary union. This consensus, however, is based on the assumption of monetary policy being optimal. Using a standard...

As a consequence of asset purchases by the European Central Bank (ECB), longer- term yields in the euro area decline, and spreads between euro area long-term yields narrow. To assess spillovers of these recent financial developments, we use a Bayesian variant of the global vector autoregressive...

This paper introduces a new effective exchange rate regime classification. Traditional classifications define the stability or flexibility of a currency with respect to one ("anchor") currency, thus implicitly neglecting information on exchange rate relationships against other currencies. Our...

The desirability of flexible exchange rates is a central tenet in international macroeconomics. We show that, with forward-looking staggered pricing, this result crucially depends on the monetary authority's ability to commit. Under full commitment, flexible exchange rates generally dominate a...

An estimated Markov-switching DSGE modelling framework that allows for parameter shifts across regimes is employed to test the hypothesis of regime-dependent credibility of Hong Kong s linked exchange rate system. The model distinguishes two regimes with respect to the time-series properties of...

Within currency unions, according to the pre-crises consensus, countries can rely on fiscal policy to stabilize economic activity locally. Monetary policy's role, in turn, is to stabilize economic activity at the union level. Against this background, we reassess the optimal degree of fiscal...

Financial crises are usually preceded by large current account deficits. However, the channel through which international capital flows affect financial stability is hardly identified, yet. In this paper, we study the impact of current account balances on bank risk-taking making use of the...

We document basic facts about prices in online markets in the U.S. and Canada, a rapidly growing segment of the retail sector. Relative to prices in regular stores, prices in online markets are more flexible as well as exhibit stronger pass-through (60-75 percent) and faster convergence...