This paper explores the impact of the exchange rate regime on inflation and output in the Central and Eastern European (CEE) EU candidate countries. The panel estimations for the period between 1994 and 2002 show that de facto measures of exchange rate stability have a better explanatory power...

According to the traditional "optimum currency area" approach, not much will be lost from a very hard peg to a currency union if there has been little reason for variations in the exchange rate. This paper takes a different approach and highlights the fact that high exchange rate volatility may...

This paper examines some determinants of banking crises in developing economies. Specifically, the effects of terms of trade shocks and capital flows are analyzed. The choice of the nominal exchange rate regime is found to be a crucial factor in the way various shocks are transmitted through the...

The standard literature on working time has modelled the decisions of firms in a deterministic framework in which firms can choose between employment and overtime (given mandated standard hours). Contrary to this approach, we follow the real options approach, which allows us to investigate the...

This paper analyses the impact of exchange rate uncertainty upon the pattern of investment in different exchange rate regimes (very hard pegs, intermediate regimes, and floats) by means of a unified approach. The comparison of different exchange rate regimes indicates that currency volatility...

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...

In an economy with large wage setters (like industry unions), the monetary regime affects the trade-off between consumer real wages and employment and profits faced by the wage setters. This paper shows that an exchange rate target, including participation in a monetary union, is likely to...

Fifty years ago, Harry G. Johnson published “The Case for Flexible Exchange Rates, 1969,” its title echoing Milton Friedman’s classic essay of the early 1950s. Though somewhat forgotten today, Johnson’s reprise was an important element in the late 1960s debate over the future of the...

Two propositions are common in the international finance literature: (1) the real exchange rate is a random walk, (2) the real exchange rate time series properties essentially depend on the nominal exchange rate regime. The first proposition has been used in support of the claim that PPP cannot...