We document the consequences of real exchange rate movements for the employment, hours, and hourly earnings of workers in manufacturing industries across individual states. Exchange rates have statistically significant wage and employment implications in these local labor markets. The importance...

Under uncovered interest parity (UIP), the size of the effect on the real exchange rate of an anticipated change in real interest rate differentials is invariant to the horizon at which the change is expected. Empirical evidence using US, euro area and UK data points to a substantial deviation...

We investigate the link between real exchange rates and sectoral total factor productivity measures for countries in the Eurozone. Real exchange rate patterns closely accord with an amended Balassa-Samuelson interpretation, both in cross-section and time series. We construct a sticky price...

While economic theory highlights the usefulness of flexible exchange rates in promoting adjustment in international relative prices, flexible exchange rates also can be a source of destabilizing shocks. We find that when countries joining the euro currency union abandoned their national exchange...

This paper derives a structural relationship between the nominal exchange rate, national price levels, and observed yields on long maturity inflation - indexed bonds. This relationship can be interpreted as defining the fair value of the exchange rate that will prevail in any model or real world...

This paper presents an analysis of the sustainability of current account deficits in transition economies in Central and Eastern Europe. These countries have experienced large current account imbalances in the transition to a market economy. We consider a wide range of macroeconomic factors that...

This paper develops a dynamic framework in which macroeconomic liberalization and stabilization measures of the type recently seen in Latin America can be studied. The model is sufficiently general to cover both polar cases of a closed capital account and free private capital mobility, so the...

The current environment is characterized by low real rates and by policy rates close to or at their lower bound in all major financial areas. We analyze these unusual economic conditions from a historical perspective and draw some implications for external imbalances, safe asset demand and the...

The European Monetary Union is stuck in a severe balance-of-payments imbalance of a nature similar to the one that destroyed the Bretton Woods System. Greece, Ireland, Portugal, Spain and Italy have suffered from balance-of-payments deficits whose accumulated value, as measured by the Target...

This paper looks at the short history of the Eurozone through the lens of an evolutionary approach to forming new institutions. The euro has operated as a currency without a state, under the dominance of Germany. This has so far allowed the euro to achieve a number of design objectives, and this...