With the recent economic crisis of 2008, global liquidity increased tremendously which in return, gave rise to the concerns regarding the “Currency Wars” due to consecutive monetary expansions conducted by both advanced and emerging countries. This paper, on the one hand presents the related...

We provide an overview of the recent developments of the literature on the determinants of long-term capital flows, global imbalances, and valuation effects. We present the main stylized facts of the new international financial landscape in which external balance sheets of countries have grown...

A modification to the Foley (2003) model is presented here introducing the role of exchange rate and foreign currency denominated debt in order to determine their influence on financial fragility, using the financial instability hypothesis of Hyman Minsky under flexible exchange rate regime....

We propose a "debt view" to explain the dominant international role of the dollar and provide broad empirical support for it. Within a simple capital structure model in which firms optimally choose the currency composition of their debt, we derive conditions under which all firms issue debt in a...

The US dollar has kept as a position of key currency in the global economy in the changing international monetary system where the euro was introduced to some states of the EU in 1999. It is an evidence of inertia of the US dollar as a key currency. Our previous study (Ogawa and Muto, 2017b)...

This paper demonstrates effects of economic convergence processes on the foreign exchange behaviour in a monetary modelling approach. Since the exchange rate represents the relative price of two currencies, commonness of stochastic trends between the fundamental determinants of supply and demand...

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...

How does international financial integration a

A second-generation model of currency crises is combined with a standard model ofbanks as providers of insurance against liquidity risk. In a pegged exchange rateregime, after funds have been committed to the banks, news arrives about the qualityof the banks’ assets and about the exchange rate...

Previous research has suggested that pegged exchange rates are associated withlower inflation than floating rates. In which direction does the causality run?Using data from a large sample of developing countries from 1984 to 2000, weconfirm that “hard” pegs (currency boards or a shared...