This working paper was written by Kang Shi (The Chinese University of Hong Kong) and Juanyi Xu (Hong Kong University of Science and Technology, and Simon Fraser University).This paper develops a small open economy model with sticky prices to show why a flexible exchange rate policy is not...

This paper studies the international spillovers of US monetary policy shocks on a number of macroeconomic and financial variables in 36 advanced and emerging economies. In most countries, a surprise US monetary tightening leads to depreciation against the dollar; industrial production and real...

Emerging Market economies have experienced periods of gradual and persistent appreciation in the real exchange rate, persistent current account deficits alongside high levels of foreign investment flows in an expansion phase followed by a contractionary phase of a sharp downward correction in...

This paper examines the determinants of cross-border flows of U.S. dollar banknotes, using a new panel data set of bilateral flows between the United States and 103 countries from 1990 to 2007. We show that a gravity model explains international flows of currency as well as it explains...

This study aims to investigate the relations between the level of the real exchange rate, foreign savings and domestic savings in Brazil. The appreciation of the domestic currency caused by financing the current account deficit reduces the expected profit rate in the tradable goods industry,...

The Eurozone recent crisis has shown how balance of payments problems in less developed European Monetary Union (EMU) member countries can affect EMU trading partners, spreading the crisis to a larger group of countries. This paper introduces a three-country dynamic general equilibrium model to...

This paper proposes a model of contagious currency crises: crises transmit across countries by raising the risk premium on government bonds. Three types of equilibria can occur: a no-collapse equilibrium (crises never transmit from abroad); a collapse equilibrium (crises are inevitably...

This paper measures the effect of monetary tightening in key advanced economies on net capital flows and exchange rates around the world. Measuring this effect is complicated by the fact that the domestic monetary policies of affected economies respond endogenously to the foreign tightening...

This paper attempts to borrow the tradition of estimating policy reaction functions in monetary policy literature and apply it to capital controls policy literature. Using a novel weekly dataset on capital controls policy actions in 21 emerging economies over the period 1 January 2001 to 31...