Macroeconomic Regime Switches and Speculative Attacks

This paper explains a currency crisis as an outcome of a switch in how monetary policy and fiscal policy are coordinated. The paper develops a model of an open economy in which monetary policy starts active, fiscal policy starts passive and, in a particular state of nature, monetary policy switches to passive and fiscal policy switches to active. The probability of the regime switch is endogenous and changes over time together with the state of the economy. The regime switch is preceded by a sharp increase in interest rates and causes a jump in the exchange rate. The model predicts that currency composition of public debt affects dynamics of macroeconomic variables. Furthermore, the model is consistent with evidence from recent currency crises, in particular small seigniorage revenues.Coordination of monetary policy and fiscal policy, policy regime switch, currency crisis, speculative attack, fiscal theory of the price level

How much of the Macroeconomic Variation in Eastern Europe is Attributable to External Shocks?

We decompose by origin the sources of the variation in real aggregate output and aggregate price level in the Czech Republic, Hungary and Poland. We find that a sizable fraction of the variation is attributable to external shocks, especially so for aggregate price level. We show that euroarea interest rate shocks can account for a significant fraction of the external spillover effects. We conclude that theoretical models of advanced transition economies and policy rules for these economies should feature a prominent role for external shocks.Vector autoregression, Granger causal priority, transition economies, external shocks

External Shocks, U.S. Monetary Policy and Macroeconomic Fluctuations in Emerging Markets

Using structural VARs, I find that external shocks are an important source of macroeconomic fluctuations in emerging markets. Furthermore, U.S. monetary policy shocks affect quickly and strongly interest rates and the exchange rate in a typical emerging market. The price level and real output in a typical emerging market respond to U.S. monetary policy shocks by more than the price level and real output in the U.S. itself. These findings are consistent with the idea that “when the U.S. sneezes, emerging markets catch a cold.” At the same time, U.S. monetary policy shocks are not important for emerging markets relative to other kinds of external shocks.Structural vector autoregression, monetary policy shocks, international spillover effects of monetary policy, external shocks, emerging markets

Nominal Debt and the Dynamics of Currency Crises

We study the interaction of fiscal and monetary policies during a currency crisis in an economy with government nominal liabilities. We show that the stock and maturity of these liabilities are key determinants of the magnitude, timing and predictability of a devaluation. Among notable features of our model, monetary authorities defend the currency parity conditional on the level of the interest rate, rather than on the stock of international reserves; budget deficits need not be high before a currency crisis; post- devaluation inflation may exhibit little persistence, and money demand need not fall after the crisis.

Macroeconomic Dynamics under Rational Inattention

This paper develops a general equilibrium model with Dixit-Stiglitz preferences, monopolistic competition and rational inattention on the side of both households and firms. We show how to solve a general equilibrium model with rational inattention. We use the model to study how rational inattention affects the impulse responses of macroeconomic variables to monetary policy shocks and technology shocks.

The euro at ten - lessons and challenges, 5th ECB Central Banking Conference, 13-14 November 2008

This volume contains a collection of papers, commentaries and speeches concerning the first decade of the euro and the recent global financial crisis.financial integration, optimal currency area

Macroeconomic Stabilization, Monetary-fiscal Interactions, and Europe's monetary Union

The euro area has been experiencing a prolonged period of weak economic activity and very low inflation. This paper reviews models of business cycle stabilization with an eye to formulating lessons for policy in the euro area. According to standard models, after a large recessionary shock accommodative monetary and fiscal policy together may be necessary to stabilize economic activity and inflation. The paper describes practical ways for the euro area to be able to implement an effective monetary-fiscal policy mix

Search for the critical point by the NA61/SHINE experiment

NA61/SHINE is a fixed target experiment operating at CERN SPS. Its main goals are to search for the critical point of stronglyinteractingmatterandtostudytheonsetofdeconfinement. Forthesegoalsascanofthetwodimensionalphase diagram (T-μB) is being performed at the SPS by measurements of hadron production in proton-proton, proton-nucleus and nucleus-nucleus interactions as a function of collision energy. In this paper the status of the search for the critical point of strongly interacting matter by the NA61/SHINE Collaboration is presented including recent results on proton intermittency, strongly intensive fluctuation observables of multiplicity and transverse momentum fluctuations. These measurements are expected to be sensitive to the correlation length and, therefore, have the ability to reveal the existence of the critical point via possible non-monotonic behavior. The new NA61/SHINE results are compared to the model predictions