Currency crises tend to be regional; they affect countries in geographic proximity. This suggests that patterns of international trade are important in understanding how currency crises spread, above and beyond any macroeconomic phenomena. We provide empirical support for this hypothesis. Using...

Regressions of ex-post changes in floating exchange rates on appropriate interest differentials typically imply that the high interest rate currency tends to appreciate - the `forward discount puzzle'. Using data from the European Monetary System we find that a large part of the forward discount...

This paper provides evidence on the effects of capital controls. We show that controls have been associated with significant differences in macroeconomic behaviour, especially in monetary policy. While they have not prevented speculative attacks, they have provided the breathing space needed to...

Fixed exchange rates are less volatile than floating rates. The volatility of macroeconomic variables, such as money and output, does not change very much across exchange rate regimes, however. This suggests that exchange rate models based only on macroeconomic fundamentals are unlikely to be...

We develop a simple formal framework to clarify the trade-offs involved in the choice between a fixed and flexible exchange-rate system. We then apply the framework to the CFA Zone countries in Africa, which have maintained a fixed parity with the French franc since independence. The...

Two issues are discussed. The first is which countries might benefit from entry into EMU before the millennium. Germany and her immediate neighbours appear the most likely to gain; our knowledge is too uncertain to say whether all, some, or no countries would reap net economic benefits, however....

The decline of the euro against the dollar during 1999-2000 was mostly unrelated to observable news about the underlying fundamentals. This corroborates a general finding from the empirical literature testing the traditional exchange rate models, i.e. that exchange rate movements are...

This paper provides a comprehensive evaluation of the short-horizon predictive ability of economic fundamentals and forward premia on monthly exchange rate returns in a framework that allows for volatility timing. We implement Bayesian methods for estimation and ranking of a set of empirical...

The paper empirically analyzes asymmetries in the EMS with special reference to their implication for the creation of a monetary union (EMU). Two types of asymmetries are analyzed: those in the form of "German dominance" are detected in the conduct of monetary policies in the EMS, in particular...

The renewed quest for a European monetary union raises the question: Is Europe ready for a common currency? We compare the variability and persistence of real exchange rate fluctuations within the German monetary union and between Germany and eight European countries to assess the viability of a...