The impact of terms of trade shocks on a small open economy: a stochastic analysis

Article Abstract:

The most important factor which affects the performance of small economies that are subject to unforeseen trade shocks is the rate at which real wealth grows. In an equilibrium situation, other real quantities stem from real wealth in this analysis. Common real wealth growth varies according to the unit which is measured, with an unexpected worsening of the terms of trade increasing growth rates for real wealth, consumption and savings, in the case that the country in question is a creditor in net terms, but not otherwise. In reverse, there will be adverse effects on these growth rates should there be a situation of net debt.

EXECUTIVE, LEGISLATIVE, AND GENERAL, Measurement, Terms of trade

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Linkage in EMS term structures: evidence from common trend and transitory components

Article Abstract:

A study of a group of European Monetary System (EMS) member countries shows that the changes in the long-term interest rates influence the common trend component of a domestic term-structure. Changes in the term structures are not isolated, both in the short and long term. The movements in the German term structure are found to be not accountable for the movements in the term structures in other nations in the EMS.

Administration of General Economic Programs, Currency Stabilization Programs, Europe, Economic aspects, Interest rates, European Monetary System, Currency stabilization

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Other people's money: cash-in-advance microfoundations for optimal currency areas

Article Abstract:

The existence of microfoundations for optimal currency areas (OCA) is investigated. Results show that the existence of support for OCA according to a cash-in-advance constraint that affects the response of labor supply to expected inflation. Households experience a delay between working and spending money which is the classical microfoundation's analog of the 'nominal price rigidity' in the OCA models.

Prices and rates, Foreign exchange, Foreign exchange rates

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