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This Paper computes welfare maximizing Taylor-style interest rate rules, in a business cycle model of a small open economy. The model assumes staggered price setting and shocks to domestic productivity, to the world interest rate, to world inflation and to the uncovered interest rate parity...
Persistent link: https://www.econbiz.de/10005114266
This Paper presents a general equilibrium currency crisis model of the 'third generation', in which the possibility of currency crises is driven by the interplay between private firms' credit-constraints and nominal price rigidities. Despite our emphasis on microfoundations, the model remains...
Persistent link: https://www.econbiz.de/10005124430
Do international trade and finance flow together? In theory, trade and finance can be substitutes or complements, so …
Persistent link: https://www.econbiz.de/10005504376
This Paper analyses the welfare effects of monetary policy rules in a quantitative business cycle model of a two-country world. The model features staggered price setting, and shocks to productivity and to the uncovered interest rate parity (UIP) condition. UIP shocks have a sizable negative...
Persistent link: https://www.econbiz.de/10005498126
We develop a theoretical model of international trade pricing in which individual exporters and importers bargain over the transaction price and exposure to exchange rate fluctuations. We find that the choice of price and invoicing currency reflects the full market structure, including the...
Persistent link: https://www.econbiz.de/10011083789
We provide cross-country and time series evidence on the extent of exchange rate pass-through into the import prices of 25 OECD countries. Across the OECD and especially within manufacturing industries, we find compelling evidence of partial pass-through in the short run, rejecting both...
Persistent link: https://www.econbiz.de/10005067536
In this paper we concentrate on the potential consequences for the European stock market of a correction of the US stock market. We conduct our analysis by explicitly considering the distinction between interdependence and contagion. By considering a Vector Error Correction Model, in which stock...
Persistent link: https://www.econbiz.de/10005067572
This paper relates the volatility of the (trade-weighted) effective real exchange rate to the degree of trade openness of an economy. The theoretical part presents an intertemporal monetary model with nominal labour (factor) market rigidities. Both monetary and aggregate supply shocks are shown...
Persistent link: https://www.econbiz.de/10005656243
We develop a framework for studying the choice of exchange rate regime in an open economy where the local currency is vulnerable to speculative attacks. The framework makes it possible to study, for the first time, the strategic interaction between the ex ante choice of regime and the...
Persistent link: https://www.econbiz.de/10005661456
Can Europe's post-war experience with fixed exchange rates be useful for today's emerging market countries? A new conventional wisdom suggests that the answer is negative, that in today's world of huge capital flows the only choice is between freely floating exchange rates and hard pegs. The...
Persistent link: https://www.econbiz.de/10005661704