This study proposes an alternative procedure for modelling exchange rates behaviour, which is a linear combination of a long-run function and a short-run function. Our procedure involves modelling of the long- run relationship and this is followed by the short-run function. Among all the...

The ASEAN Economic Community (AEC) will be shaped developing to be a single market and production base in 2015, moving towards regional Economic Integration, 2009. These developments in international financial markets do lead to some adverse cost for AEC country borrowers. The specific objective...

This paper examines the implications of monetary policy rules for exchange rate dynamics. I extend a standard New Open Economy Macroeconomics model with the introduction of a simple money supply rule, whereby central banks change their monetary policy if output diverges from potential output or...

This paper provides a survey of recent theories of herding behaviour, bridging two rather distants strands of literature (roughly, American and European). In the first part of the paper the explanation is based on the idea of asymmetric information and principal-agent approach; these could lead...

The exchange rate affects the economy through many channels and, consequently, has diverse macroeconomic and development impacts. Five are analysed in this paper: resource allocation, economic development, finance, external balance and inflation. The use of the exchange rate as a developmental...

A central issue for international monetary economics is to establish the impact of different exchange rate regimes on inflation performance. This paper addresses a key aspect of this question, how differences in country size affect inflation performance under alternative exchange rate regimes....

While flexible exchange rates facilitate stabilisation, exchange rate fluctuations can cause real volatility. This gives policy importance to the causal relationship between exchange rate depreciation and its volatility. An exchange rate may be expected to become more volatile when the...

The paper studies risk mitigation associated with capital regulation, in a context when banks may choose tail risk assets. We show that this undermines the traditional result that higher capital reduces excess risk-taking driven by limited liability. When capital raising is costly, poorly...