Using a simple model, this paper shows how a strict monetary rule exhibits characteristics similar to those of an exchange rate anchor, in terms of a lack of robustness in the presence of adverse expectations (“bad dreams”). More specifically, as an anticipated devaluation under an exchange...

Since beginning economic transition, the Czech Republic, Estonia, Hungary, Poland, and Slovenia have—with much success—employed diverse exchange rate regimes. As these countries approach EU accession, they will need to avoid the perils of too much or too little exchange rate variability when...

The present article is a reply to the article by John A. Tatom titled ``The US-China Currency Dispute: Is a Rise in the Yuan Necessary, Inevitable or Desirable?," recently published in this journal. We found that John Tatom seems to only give a partial description of the US-Chinese economic...

China-bashing has become a popular US media and political sport. This is largely due to the US trade imbalance and the belief, by some, that China is responsible for it because it manipulates its currency to hold down the dollar prices of its goods, unfairly creating a trade advantage that has...

This paper summarizes the methods and types of indicators that are often employed, both insid and outside the IMF, to assess whether exchange rates are broadly in line with economic fundamentals.

Starting with Friedman and Mundell the academic literature has conducted a high level debate concerning the design of cross-country monetary arrangements. That debate has become very complex and the data requirements necessary for appropriate application of the principles developed are far...

This paper examines the question of how to design an optimal and sustainable exchange rate regime in a world economy of two interdependent countries. It develops a Barro-Gordon type two-country model and compares noncooperative equilibria under different assumptions of monetary policy...

This paper examines the problems in establishing currency convertibility- and the optimal timing- in formerly planned economies making the transition to market-oriented systems.