This paper gives a detailed explanation of why a central bank without fiscal backing can lose control of inflation. Moreover, it argues that such danger emerged only recently for the ECB due to its increasing quasi-fiscal activities. Finally we argue that it might not generally be a good idea to...

A sequence of crises and emergency interest rate cuts has moved global interest rates towards zero and government debt to historical records. We discuss the available options to exit from unconventional monetary policies and unsustainable government debt. First, we shed light on the probability...

This paper tackles the issue of cross-section dependence for the monetary exchange rate model in the presence of unobserved common factors using panel data from 1973 until 2007 for 19 OECD countries. Applying a principal component analysis we distinguish between common factors and idiosyncratic...

In the debate on global imbalances, the euro area countries did not receive much attention so far. While the current account is on balance for the entire area, divergences between individual member states have increased since the introduction of the common currency. In this paper, the imbalances...

This paper examines the long-run relationship between energy consumption and real GDP, including energy prices, for 25 OECD countries from 1981 to 2007. The distinction between common factors and idiosyncratic components using principal component analysis allows to distinguish between...

The current financial crisis is often said to be caused by excessive liquidity and distorted incentives in the US subprime real estate sector. Taking this as a starting point, this paper analyzes the relation between house prices and credit respectively money growth between 1992 and 2006 (West...

The paper evaluates the costs and benefits of exchange rate (and interest rate) stability for the countries in the Southern Cone of Latin America. It investigates the correlation between two aspects of financial market volatility, namely that of the exchange rate and interest rate volatility,...

This article examines the interactions between money, consumer prices and commodity prices at a global level from 1970 to 2008. Using aggregated data for major Organization for Economic Cooperation and Development (OECD) countries and a Cointegrating Vector Autoregression (CVAR) framework, we...