In this paper, different Divisia monetary aggregates for the euro area are constructed over the period from 1980 to 2000. Theoretically, one main difference of these aggregates is their reaction to exchange-rate variations. Empirically, the aggregates are compared with respect to three issues....

This paper uses a three-country, three-good, factor-specific model of trade with wage rigidities to investigate how European Monetary Union (EMU) is likely to affect exchange rate variability. Focusing on international macroeconomic adjustment under both exogenous and optimizing monetary...

The present work deals with a frequently detected failure of the uncovered interest rate parity (UIP) - the absence of bivariate cointegration between domestic and foreign interest rates. We explain non-stationarity of the interest differential via central bank reactions to exchange rate...

An often heard view is that exchange rate variability will decrease for a country that joins the EMU. This is not necessarily true. Both real and nominal exchange rate variability increase under certain circumstances when asymmetric demand shocks occur inside or outside the union. These results...

In this paper, different Divisia monetary aggregates for the euro area are constructed over the period from 1980 to 2000. Theoretically, one main difference of these aggregates is their reaction to exchange-rate variations. Empirically, the aggregates are compared with respect to three issues....

This paper studies Ramsey-optimal monetary and fiscal policy in a New Keynesian 2-country open economy framework, which is used to assess how far fiscal policy can substitute for the role of nominal exchange rates within a monetary union. Giving up exchange rate flexibility leads to welfare...