The present paper incorporates a mechanism of rules-based central-bank interventions into a Dornbusch-type framework. We show that the implied reactions of exchange rates and interest and interest rate differentials in response to a monetary shock depend crucially on the particular monetary...

This paper investigates whether Europe is converging towards becoming an optimum currency area. To this end, a structural vector autoregression with exclusively long‐run exclusion restrictions is employed on European bilateral real exchange rates, relative CPIs and real output to compare the...

We argue that the use of publicly available and easily accessible information on economic and financial crises to detect structural breaks in the link between stock returns and macroeconomic predictor variables improves the performance of simple trading rules in real time. In particular, our...