Changes in exchange rates have become a prominent issue in Germany and Japan - due to the enormous appreciation of the Deutschmark and the Yen. Conventional wisdom suggests that economic activity will be negatively affected if a currency is going through a phase of appreciation. The paper...

The financial crisis 2008-2009 and the European sovereign debt crisis have shown that stress on financial markets is important for analyzing and forecasting economic activity. Since financial stress is not directly observable but is presumably reflected in many financial market variables, it is...

We develop a dynamic general equilibrium two-economy model in order to analyze the welfare effects of monetary policy in open economies. The model features two distortions: one distortion due to monopolistic competition, and one distortion due to a consumption externality. This consumption...

A dynamic general equilibrium two-country optimizing model is used to analyze the welfare effects of monetary policy in open economies. The distinguishing feature of the model is that householdsÂ’ preferences feature a "keeping up with the Joneses" effect. This effect implies that...

Changes in foreign asset holdings are one channel through which agents adjust to macroeconomic shocks. In this paper, we test whether foreign bank assets change as a result of domestic and foreign macroeconomic shocks. We frame our empirical analysis in a standard new open economy macro model in...

In the discussion about the structure and evolution of financial systems, the US separated and the German universal banking system are commonly considered as antipodes. This paper shows that the differences in the role of banks in these two economies are less pronounced than the conventional...

Eastern Germany’s recovery from the “unification shock” has been characterized by deep structural change – with apparent repercussions for the West as well – and an integration process involving both capital deepening (extensive and intensive investment) and labor thinning (net...

This paper analyzes rules for international factor movements, i.e. real capital flows together with the relocation of firms, the flow of technology and the migration of people. These rules have to make sure that individuals, individual countries as well as the world economy benefit from factor...

The paper investigates the relationship between offshoring, wages, and the ease with which individuals' tasks can be offshored. Our analysis relates to recent theoretical contributions arguing that there is only a loose relationship between the suitability of a task for offshoring and the...

Although an extensive amount of literature reviews emerging patterns of east-west co-operation, it is not easy to grasp the state of the art. Too many of the books, articles and papers tend to mark the trees rather than to map the forest. The paper analyses recent trends from the point of view...