In this paper we connect the events of the last twelve months, "The Panic of 2008" as it has been called, to the demand for international reserves. In previous work, we have shown that international reserve demand can be rationalized by a central bank's desire to backstop the broad money supply...

The paper discusses what we have learned from last year's currency crises in ERM and the Nordic countries about fixed exchange rates as a means to achieve price stability. After discussing the explanations for the crises, the paper concludes that fixed exchange rates are not a shortcut to price...

By looking at how an East Asian currency moves when the yen fluctuates sharply against the US dollar, we sometimes find that the reaction has been much more significant than would be suggested by the econometric estimates of the weight of the yen in nominal exchange rate determination. Moreover,...

This paper addresses the issue of whether regimes of fixed exchange rates are a mechanism for shifting volatility inter- temporally. Using a panel of data covering twenty industrialized countries from 1959 through 1993, I examine the volatilities of a host of real and monetary variables....

On the eve of a major change in the world monetary system, the adoption of a single currency in Europe, our theoretical understanding of the implications of the exchange rate regime for trade and capital flows is still limited. We argue that two key model ingredients are essential to address...

Exchange rates have been at the center of economic debates in emerging economies. Issues related to the feasibility of flexible exchange rates, the relationship between exchange rate volatility and growth, and the role of exchange rate overvaluation in recent crises, among other, have been...

This paper analyzes competing interpretations for the large increases in the hoarding of international reserves by developing countries. While the first phase of the rapid hoarding of reserves in the aftermath of the East Asian crisis has been dominated by self insurance against exposure to...

We explore the parallels between Japanese currency policy after World War II and Chinese currency policy today. After two decades of pegging at 360 yen, Japan decoupled from the dollar on August 1971 and then repegged at a revalued rate of 308 yen. After stabilizing the exchange rate at this new...

Might the dollar eventually follow the precedent of the pound and cede its status as leading international reserve currency? Unlike ten years ago, there now exists a credible competitor: the euro. This paper econometrically estimates determinants of the shares of major currencies in the reserve...

We analyze the policy trade-offs generated by local currency price stability of imports in economies where upstream producers strategically interact with downstream firms selling the final goods to consumers. We study the effects of staggered price setting at the downstream level on the optimal...