In this paper, a short survey is given on the contents and some problems of the theory of optimal currency areas. In addition, a new criterion for the assessment of the optimality of a currency area is proposed: the ability of member states of a monetary union to adjust their economic system to...

Within the economic profession, it is a widely held view that the fiscal criteria of the Maastricht treaty are arbitrary numbers without economic foundation. Much of this criticism seems to overlook an important aspect - the strategic dimension of the criteria. This paper focuses on one...

At the turn of the millennium three frequently cited potential causes of new challenges for wage policy in Germany are revisited in this study: skilled-biased technological progress, the increasing international integration of labor and product markets, and the monetary integration of the EMU....

Are the characteristics of the exchange rate regime relevant for the degree of fiscal discipline? What are the conclusions for fiscal behavior in Europe after the transition to EMU? These are the central questions that are analyzed in this paper from a theoretical point of view. After a general...

The ECB's one size monetary policy is unlikely to fit all euro area members at all times, which raises the question of how much monetary policy stress this causes at the national level. I measure monetary policy stress as the difference between actual ECB interest rates and Taylor-rule implied...

Evidence on the effectiveness of FX interventions is either limited to short horizons or hampered by debatable identification. We address these limitations by identifying a structural vector autoregressive model for the daily frequency with an external instrument. Applying this approach to the...

The British foreign exchange reserves decreased by 40 percent during the period August 1996 - December 1999 although the Pound Sterling is considered a floating exchange rate since it left the EMS in 1992. Since changes in the level of foreign exchange reserves are usually taken as indicators...

In this paper we ask if central bank independence could lead to a bad fiscal position of some countries. Introducing autonomous central bank without changing other policy habits could expose the country to greater temptation to borrow money. We think that introducing high degree of CBI creates...

Increases in firm default risk raise the default probability of banks while decreasing output and inflation in US data. To rationalize the empirical evidence, we analyse firm risk shocks in a New Keynesian model where entrepreneurs and banks engage in a loan contract and both are subject to...

This paper compares the consequences of equity injections into banks with purchases of corporate and government bonds in a financial crisis situation using a New Keynesian model in which non-financial firms predominantly take non-market-based debt from banks instead of issuing securities. Our...