The recession in the Eurozone has given new life to optimal-currency-area thinking. The argument goes that the disadvantages of a single currency come from the loss of flexibility and ability to use monetary policy to respond to “asymmetric shocks” (Krugman and Obstfeld 2009).
Independent monetary policies, synchronised outcomes
Espen Henriksen, Finn Kydland, Roman Šustek, 2 October 2013
Is there a dilemma with the Trilemma?
Michael W Klein, Jay C. Shambaugh , 27 September 2013
In the Handbook of Safeguarding Global Financial Stability, the chapter “Capital Mobility and Exchange Rate Regimes” begins “Forced to state all the insights of international macroeconomics while standing on one leg, one could do worse than raise a foot off the ground and say something like:
Fixed versus flexible exchange-rate regimes: Do they matter for real exchange-rate persistence?
Paul Bergin, Reuven Glick, Jyh-lin Wu, 4 October 2012
Flexible exchange rates have been praised in economic theory as a mechanism for helping relative prices adjust between countries in response to shocks to relative supply and demand (Friedman 1953). In this view, fluctuations in the real exchange rate, measuring the relative cost of living across countries, are a welcome thing.
The limits of a purely intra-euro rebalancing strategy
Zsolt Darvas, 5 September 2012
The perceived failure of Greece, Portugal, and Spain to achieve sustainable external positions and economic growth inside the Eurozone is a major factor behind the current crisis. Their trade deficits should be turned to sizeable surpluses in which real exchange rate developments should play a role.
Small open economies have to be managed differently: devaluation is contractionary in both the short and long run
DeLisle Worrell, 23 June 2012
There is a fallacy at the root of most of the discussion of the European economic crisis, and it is that countries like Greece would have the option to grow their economies through exchange rate depreciation, were they outside the Eurozone.
Foreign-exchange intervention and the fundamental trilemma of international finance: Notes for currency wars
Michael Bordo, Owen F Humpage, Anna J Schwartz, 18 June 2012
In the mid-1990s, many of the large developed countries ended their activist approach to foreign-exchange-market intervention. Yet while these operations faded, they never disappeared. The Great Recession recently piqued interest in them, as exchange-rate volatility increased and threats of currency wars were heard (see Neely 2011).
On Inflation Targeting and Forex Intervention: Are Two Targets Better Than One?
Jonathan D Ostry, Atish R Ghosh, Marcos Chamon, 27 May 2012
The global financial crisis has reminded emerging market economies, if they needed reminding, that capital flows can be highly volatile and that crises need not be home grown. Emerging markets have been affected in a variety of ways, not least by the sharp ups and downs in exchange rates that volatile capital flows engender.
How should Japan’s current exchange rate be viewed?
Takatoshi Ito, Junko Shimizu, 20 March 2012
Japan is frequently cited by US and European commentators as a warning of what could happen to their economies (see, for instance, Muellbauer and Murata 2011). We hear less, however, about what is happening now.
The renminbi’s prospects as a global reserve currency
Eswar Prasad, Lei (Sandy) Ye, 16 February 2012
Popular discussions about the prospects of China’s currency – the renminbi – range from the view that it is on the threshold of becoming the dominant global reserve currency to the concern that rapid capital-account opening poses serious risks for China.
Shifting motives: Explaining the build-up in official reserves in emerging markets since the 1980s
Atish R Ghosh, Jonathan D Ostry, Charalambos Tsangarides, 6 February 2012
Over the past few decades, despite greater exchange-rate flexibility, emerging economies have been accumulating large stocks of international reserves. Reserve holdings, which averaged about 5% of GDP in the 1980s, have been doubling every decade since, reaching some 25% of GDP by 2010.
- A tale of two depressions: What do the new data tell us? February 2010 updateEichengreen, O’Rourke
- The ECB’s stealth bailoutSinn
- Educated in America: College graduates and high school dropoutsHeckman, LaFontaine
- Eurozone breakup would trigger the mother of all financial crisesEichengreen
- Panic-driven austerity in the Eurozone and its implicationsDe Grauwe, Ji
Adelman, 28 October 2013
Reichlin, Giugliano, 7 November 2013
Holmes, McGrattan, Prescott
Beck, De Haas, Ongena
CEPR Policy Research
- The buyer margins of firms' exportsCarballo, Ottaviano, Volpe
- Commodity and Equity Markets: Some Stylized Facts from a Copula ApproachDelatte, Lopez
- Ethnic Unemployment Rates and Frictional MarketsGobillon, Rupert, Wasmer
- Finance and Poverty: Evidence from IndiaAyyagari, Beck, Hoseini
- The Manipulation of Basel Risk-WeightsMariathasan, Merrouche
- What’s wrong with Europe?Baldini, Manasse
- How the EZ crisis is permanently changing EU institutionsMicossi
- WTO 2.0: Global governance of supply-chain tradeBaldwin
- Is US economic growth over? Faltering innovation confronts the six headwindsGordon
- The economic crisis: How to stimulate economies without increasing public debtWood