Monetary Union, Real Exchange Rate, and Welfare

Monetary Policy, Exchange Rate Flexibility, and Exchange Rate Pass-Through

This paper develops a dynamic general-equilibrium (DGE) model of a small open economy to investigate alternative monetary rules, differing primarily in the degree to which they allow for exchange rate flexibility. A central argument of the paper is that the nature of the trade-off between fixed and floating exchange rates may be quite different in mature industrial economies than in emerging-ma...

Real Convergence in a Monetary Union

Since Krugman’s “Geography and Trade” it has become common knowledge among economists that the spatial consequences of “integration”, that is to say of reduced transaction costs, may be the building up of agglomerations with high productivity levels and external economies of scale (the centre) whereas the periphery is being deprived by out-migration. The authors of a recent study published by t...

Monetary Shocks and Real Exchange Rates

Many explanations of the stylized facts concerning real exchange rate movements focus on monetary shocks, but it is often found empirically that monetary shocks are unimportant. I provide evidence that is contrary to this empirical finding. Using over 100 years of data, I estimate the contribution of various shocks to explaining variation in the real pound-dollar exchange rate. Monetary shocks ...

Monetary Union Its Costs

Real Effective Exchange Rate and Trade Performance in Iran

The Purpose of this paper is to investigate the long-run effect of real effective exchange rate on Iran non-oil trade balance. The methodology is based on ARDL procedure that can be applied irrespective of whether the regressors are I(0) or I(1). The results show the real depreciation has not a favorable long - run effect on the non-oil trade balance of Iran from 1979 to 2001.