The theory of optimum-currency-areas was conceived and developed in three highly influential papers, written by Mundell (1961), McKinnon (1963) and Kenen (1969). Those authors identified characteristics that potential members of a monetary union should ideally possess in order to make it...

Dooley, Folkerts-Landau and Garber (DFG) argue that the present constellation of global exchange-rate arrangements constitutes a revived Bretton-Woods system. DFG ALSO argue that the revived system will be sustainable, despite its large global imbalances. We argue that, to the extent that the...

Owing to dissatisfaction with the IMF’s de jure classification of exchange-rate regimes, a substantial literature has emerged presenting de facto classifications of exchange-rate systems and using the latter classifications to compare performances of alternative regimes in terms of key...

We compare monetary union to flexible exchange rates in an asymmetric, threecountry model with active monetary policy. Unlike the traditional OCA literature, we find that countries with a high degree of nominal wage rigidity benefit from monetary union, specially when they join other, similarly...

The origins of the Greek-sovereign debt crisis were the country’s large fiscal and external imbalances. The key factor that abetted those imbalances was the absence of a short-to-medium term adjustment mechanism -- due to perceptions of sovereign bailouts -- in the euro-area that would have...

This paper examines the behaviour of the demand for money in Greece during 1976:1-2000:4, a period that included many of the influences that cause money-demand instability. Two empirical methodologies, vector error correction (VEC) modelling and second-generation random coefficient (RC)...

The relationship between exchange-rate volatility and aggregate export volumes for 12 industrial economies is examined using a model that includes real export earnings of oil-producing economies as a determinant of industrial-country export volumes. A supposition underlying the model is that,...

As part of its monetary policy strategy, the European Central Bank has formulated a reference value for M3 growth. A pre-requisite for the use of a reference value for M3 growth is the existence of a stable demand function for that aggregate. However, a large empirical literature has emerged...

This paper provides an introduction to the special issue “The Crisis in the Euro Area”. We take stock of what the euro area crisis has taught us about monetary integration. At the inception of the euro area in 1999, the main parameters of the theory of monetary integration seemed to have...

We investigate the impact of the economic fundamentals, sovereign credit ratings, political uncertainty, and the ECB’s Securities Markets Program (SMP) on Greek sovereign spreads. Our findings show that sovereign downgrades and political uncertainty appear to have been drivers of the sharp...