This paper studies the effects of foreign exchange (FX) interventions in a two-region New Keynesian model where governments issue both short-term and long-term bonds. Imperfect substitutability between bonds gives rise to portfolio balance effects that make FX interventions effective....

According to theory, inflation persistence should have less variance across countries under pegged than floating exchange rates, but not necessarily a lower mean. The paper tests this prediction on postwar data for OECD countries. After allowing for the upward bias to persistence estimates...

The paper develops a model of exchange rate regime choice centered on the trade-off between internal price stability and external competitiveness and allowing for institutional costs of altering exchange rate arrangements. The main implication of the model is a nonlinear relationship between the...

The problem is to evaluate the likelihood that a country will face a currency or balance of payments crisis over a given horizon. When is it rational for market participants to expect a depreciation of the currency? On the basis of considerable empirical studies we know that in both banking and...

The choice of an exchange rate peg often points to a trade-off between gaining credibility and losing flexibility. We show that the flexibility loss may be reduced if domestic and foreign shocks are coorelated and more volatile. Allowing for a plausible structural change after a peg, a...

We test a simple model of exchange rate regime choice with data for 65 non-OECD countries covering the period 1980-94. We find that the variance of output at home and in potential target countries as well as the correlation between home and foreign real activity are powerful and robust...

Policy makers face trade-off in dealing with exchange rate management, mo- netary independence and concerns about capital mobility simultaneously. This study empirically examines the effects of Nigeria's trilemma policy path on interest rate using data spanning from 1997:Q1 to 2017:Q3. It...

This paper revisits the case for flexible vs. fixed exchange rate regime in a two-country model with firm heterogeneity and nominal wage rigidity under incomplete financial markets. Dampening nominal exchange rate fluctuations simultaneously stabilizes the firm turnover in the export market....

We study the impact of the ECB's large scale asset purchase programme on selected euro area and neighbouring countries. The effects of the programme are assessed by conducting an event study as well as by estimating a structural VAR model using a shadow short rate as a measure of the monetary...

We use consumer price data for 205 cities/regions in 21 ountries to study deviations from the law-of-one-price before, during and after the major currency crises of the 1990s. We combine data from industrialised nations in North America (Unites States, Canada, Mexico), Europe (Germany, Italy,...