In this paper I investigate the relevance of the exchange rate regime for macroeconomic stability. I simulate hypothetical macroeconomic developments under different regimes in Sweden during the period 1972 -1996. The main question is how stable output would have been if Sweden had had a...

This paper empirically investigates the effects of institutional and macroeconomic policy stance variables on current account deficits (CAD). Based on cross-section data for a broad number of developing and industrial countries, the results strongly suggest that better governance increases...

This paper quantifies the relative contribution of domestic, regional and international factors to the fluctuation of domestic output in six key Latin American (LA) countries: Argentina, Bolivia, Brazil, Chile, Mexico and Peru. Using quarterly data over the period 1980:1-2003:4, a multivariate,...

We investigate monetary-policy autonomy under different exchange-rate regimes in small, open European economies during the 1980s and 1990s. We find no systematic link between ex post monetary-policy autonomy and exchange rate regimes. This result is enforced for countries/periods with...

We investigate whether the fact that most countries cannot borrow internationally in their own currencies, referred to as “original sin” by Eichengreen and Hausmann (1999), may remain as a “mystery” when an alternative variable set and estimation procedure are taken into account. Our...

This paper empirically investigates Mundell's (1961) formalisation that in a small open economy flexible exchange rates act as a `shock absorber'. The role of a world real interest rate shock in driving output, trade imbalances and real exchange rate fluctuations under different exchange rate...

The literature on optimum currency areas argues that in the presence of countryspecific real shocks, the cost of fixing exchange rates is decreasing in the degree of trade openness. This study uses a stochastic dynamic general equilibrium model of endogenous specialization to assess the benefit...

Financial dollarization in Bolivia is near complete (over 90% of total deposits and loans). The paper gives an inventory of the problems caused by de facto dollarization to actual policy making. The phenomenon has deep roots and was engendered by high inflation that reached hyperinflationary...

Currency and financial turmoils in international capital markets have been the focus of an extensive theoretical research which started around 30 years ago. This paper provides a synthetic overview of this theoretical modeling. We analyze the basic analytical framework corresponding to the...

This paper addresses arguments that a system of fiscal insurance between member states of the European Union is needed to act in replacement of nominal exchange rate flexibility as an automatic stabilizer under monetary union. Many authors have argued or assumed that asymmetric real...