This paper studies the optimal choice of exchange rate regimes between two large currency areas. It provides a positive and normative analysis of alternative monetary policy rules in a model with sticky prices, monopolistic competition, and frictions in the processes of capital accumulation and...

Major currency areas are characterized by important differences in financial structure that are clear in microeconomic data. Surprisingly, this fact is seldom discussed in the analysis of the international transmission of shocks. This paper attempts to fill the gap. First, I show some stylized...

In this paper, we study the effects of structural shocks that influence global risk - the main factor behind a "global capital flows cycle" - and how risk, in turn, is transmitted to capital flows. Our results show that not all the risk shocks driving the global financial cycle have the same...

We study what makes government bonds a safe asset. Building on a sample of monthly changes in government bond yields in 40 advanced and emerging countries, we analyse the sensitivity of yields to country specific fundamentals interacted with changes in global risk (VIX). We find that inertia...

Inflation volatility is clearly important for structural analysis, forecasting and policy purposes, yet it is often overlooked in the literature. This paper compares in ation volatility among advanced open economies with in ation targeting monetary policy frameworks. The results of the empirical...

This paper surveys the optimum currency area (OCA) literature. It is organised into four phases: the 'pioneering phase' which put forward the OCA theory and its properties, the 'reconciliation phase' when its diverse facets were combined, the 'reassessment phase' that led to the 'new OCA theory'...

This paper tests for the hypothesis that institutional integration interacts with economic integration at the regional level. In particular, we ask what lessons can be drawn from the European experience with regional integration for Latin America. Several indicators of institutional and economic...

In this paper we provide a positive exercise on past business-cycle correlations and risk sharing in the European Union, and on the ability of insurance mechanisms and fiscal policies to smooth income fluctuations. The results suggest in particular that while some of the new Member States have...

We study what makes government bonds a safe asset. Building on a sample of monthly changes in government bond yields in 40 advanced and emerging countries, we analyse the sensitivity of yields to country specific fundamentals interacted with changes in global risk (VIX). We find that inertia...

Inflation volatility is clearly important for structural analysis, forecasting and policy purposes, yet it is often overlooked in the literature. This paper compares inflation volatility among advanced open economies with inflation targeting monetary policy frameworks. The results of the...