We test the hypothesis that the government bond markets in the Eurozone are more fragile and more susceptible to self-fulfilling liquidity crises than in stand-alone countries. We find evidence that a significant part of the surge in the spreads of the peripheral Eurozone countries during...

While acknowledging that the massive amounts of liquidity injected into the eurozone banking system by the ECB were absolutely necessary to save Europe’s banking system, Paul De Grauwe now criticizes these lender-of-last-resort operations as ill-designed, making it likely that the ECB will...

Linear models in which exchange rates are driven by stochastic `news' are subject to a number of failings. In this paper we present a non-linear, deterministic model, incorporating concepts from chaos theory, which is capable of producing unpredictable exchange rate movements without `news'. Two...

In this paper we analyze issues of symmetry and asymmetry in the workings of the EMS. We first measure how interest rates react to speculative disturbances. We find that despite the fact that speculative shocks have usually forced the offshore interest rates of the weak currencies to increase by...

In this Paper we analyse whether the emergence of electronic money is likely to affect the optimal size of monetary unions. We distinguish between two possible future scenarios. In one scenario, electronic money supplants the existing publicly supported monetary networks (including the national...

The effectiveness of alternative loss functions assigned to the common central bank of a monetary union is studied. The alternative policy objectives are a function of the degree of aggregation of decision variables. We consider, respectively, the policy based on the union-wide aggregates and...