We examine the effects of the Czech National Bank communication, macroeconomic newsand interest rate differential on exchange rate volatility using generalized autoregressiveconditional heteroscedasticity model. Our results suggest that central bank communicationhas a calming effect on exchange...

The objective of this paper is to analyze the effects of alternative monetary rules on realexchange rate persistence. Using a two-country stochastic dynamic general equilibrium withnominal price stickiness and local currency pricing, we will show how the persistence ofpurchasing power parity...

The fiscal theory of the price level says that the price level can be made determinate if thegovernment uses fiscal policies such that government liabilities explode unless the price inthe first period is at the “right” level. The policy implications are disturbing, as they callfor rather...

We propose a theory of exchange rate determination under interestrate rules in a two-country model. We first show that simpleinterest rate feedback rules can determine a unique and stableequilibrium without any explicit reaction to the nominal exchangerate.We characterize how the behavior of the...

Recent data show substantial increases in the size of gross external asset and liabilitypositions. The implications of these developments for optimal conduct of monetarypolicy are analyzed in a standard open economy model which is augmented to allowfor endogenous portfolio choice. The model...

This paper studies optimal monetary policy with the nominal interest rate as the single policy instrument in an economy, where firms set prices in a staggered way without indexation and real money balances contribute separately to households' utility. The optimal deterministic steady state under...

We study the impact of Central Bank intervention on the process of price formation in currency markets. We use a unique dataset of tick-by-tick indicative quotes posted by dealers on Reuters terminals and of intraday sterilized spot interventions and customer transactions executed on behalf of...

The U.S. dollar holds a dominant place in the invoicing of international trade, along two complementary dimensions. First, most U.S. exports and imports invoiced in dollars. Second, trade flows that donot involve the United States are also substantially invoiced in dollars, an aspect that has...