Credibility and transparency are at the core of the current debate on exchange rate regimes. Among the reasons why intermediate regimes have fallen out of favor, a possibly important one is that they are not transparent: it is difficult to verify them. This paper investigates how difficult it is...

This paper evaluates the consequences of the integration of international asset markets when goods markets are characterized by price rigidities. Using an open economy general equilibrium model with volatility in the money markets, we show that such an integration is not universally beneficial....

Omitted from traditional OCA criteria, price effects are important because regional monetary union protects from pricing risks and contributes to greater uniformity and efficiency in price setting. Among member countries it reduces price dispersion in tradables in part by irrevocably fixing the...

Using a large sample of developing and industrialized economies during 1970-1999, this paper explores whether the choice of exchange rate regime affects the sensitivity of local interest rates to international interest rates. In most cases, we cannot reject full transmission of international...

This paper discusses whether the integration of international financial markets affects business cycle fluctuations. In the framework of a new open economy macro-model, we show that the link between financial openness and business cycle volatility depends on the nature of the underlying shock....

Regional monetary union offers important income and price-level insurance to its members. The welfare gains available through the completion of financial markets from income and consumption insurance alone are especially large. They are much greater than those available from access to...

In recent years free movement of financial capital following financial liberalization has given the impression that financial markets are truly globalized. In this paper we argue that free movement of financial capital alone does not constitute financial globalization. To achieve true financial...

There is evidence for a strong demand for safety, both steady and inelastic. A sudden loss of safe assets played a key role in the financial crisis and European sovereign debt crisis. I show that a common fiscal policy can benefit all member states of a monetary union by offering a more...

The movement of some members of the European Union towards a common currency area is likely to spark interest in other possible common currency areas. One such area of interest is a North American common currency area. In this paper some results from tests of microeconomic foundations of a North...