Research Interests

• monetary economics
• international macroeconomics

Selected Publications

Monograph

• Essays on International Price Rigidities and Exchange Rates, (2000), unpublished Ph.D. dissertation, KU Leuven, 236 p. (available upon request)

Publications

• Non-linearities and Unit Roots in G7 Macroeconomic Variables, (2008),  The B.E. Journal of Macroeconomics, Berkeley Electronic Press, vol. 8(1) Article 5. (with Miguel Leon Ledesma).
  • We carry out a meta-analysis on the frequency of unit-roots in macroeconomic time series with a dataset covering 249 variables for the G7 countries. We use linear tests and the three popular non-linear tests (TAR, ESTAR and Markov Switching). In general, the evidence in favour of the random walk hypothesis is weaker than in previous studies. This evidence against unit roots is stronger for real and nominal asset prices. Our results show that rejection of the null of a unit root in the macro dataset is substantially higher for non-linear than linear models. Finally, the results from a Monte Carlo experiment show that rejection frequencies are very close to the nominal size of the test when the DGP is a linear unit root process. This leads us to reject the hypothesis that overfitting  deterministic components explains the higher rejection frequencies of nonlinear tests.
• Exchange Rates, Prices and International Trade in a Model of Endogeneous Market Structure, (2007), The Manchester School, Vol. 75, pp. 160-92 (with Hanno Lustig).
  • We suggest a new dynamic equilibrium approach that features product differentiation and endogenizes market structure at the same time. The model yields clear-cut predictions regarding the effects of small and large exchange rate shocks on the market structure, pass-through and international trade. First, we account for the asymmetric price adjustment process with respect to exchange rate shocks. Second, we discuss an array of conditions where short- and long-run international monetary neutrality is violated. We present in detail under which conditions imperfect competition is able to generate persistent and volatile real exchange rate deviations. Most predictions survive alternative market configurations.
• A Quantitative Exploration of the Opportunistic Approach to Disinflation, (2006), Journal of Monetary Economics, Vol. 53/ 8, pp. 1877-1893.(with Orphanides, A., Small, D., Wieland, V., and D. Wilcox).
  • Under a conventional policy rule, a central bank adjusts its policy rate linearly according to the gap between inflation and its target, and the gap between output and its potential. Under ‘‘the opportunistic approach to disinflation’’ a central bank controls inflation aggressively when inflation is far from its target, but concentrates more on output stabilization when inflation is close to its target, allowing supply shocks and unforeseen fluctuations in aggregate demand to move inflation within a certain band. We use stochastic simulations of a small-scale rational expectations model to contrast the behavior of output and inflation under opportunistic and linear rules.
• US Domestic Money, Inflation and Output, (2006), Journal of Monetary Economics, Vol 53/2, pp 183-197, lead article (with Tomasz Piskorski) Data
  • Recent empirical research documents that the strong short-term relationship between U.S. monetary aggregates on one side and inflation and real output on the other has mostly disappeared since the early 1980s. Using the direct estimate of flows of U.S. dollars abroad we find that domestic money (currency corrected for the foreign holdings of dollars) contains valuable information about future movements of U.S. inflation and real output. Statistical evidence suggests that the Friedman–Schwartz stylized facts can be reestablished once the focus of analysis is back on the correct measure of domestic monetary aggregates.
• US Domestic Currency in Forecast Error Variance Decompositions of Inflation and Output, (2005), Economics Letters, Vol 86/2, pp. 265-271 (with Tomasz Piskorski).
  • We find that domestic currency, currency corrected for foreign holdings, has a substantial share in forecast variance decomposition of US inflation. We also find that domestic currency has higher share of the forecast error variance decomposition of US real output than any other narrow monetary aggregate we consider.
• Do Asymmetries Matter for European Monetary Policy?, (2002), European Economic Review, Vol: 46/3, pp.443-469 (with Paul De Grauwe and Hans Dewachter).
  • In this paper we analyze the impact of economic and institutional (ECB decision rules) asymmetries on the effectiveness of monetary policy in Euroland. We consider a model where asymmetric shocks and divergent propagation of shocks in output and inflation are potential causes of tensions within the ECB concerning the conduct of common monetary (interest rate) policy. Welfare implications of the alternative decision procedures are discussed.
• Firms, International Money and Prices: A Survey of the Literature, (2001), Tijdschrift voor Economie and Management, Vol. 46, pp. 175-201.
• Exchange Rate Pass-Through in Vertically Related Markets, (2000), Review of International Economics, Vol. 8, pp. 235-251 (with Yohanes Eko Riyanto).
• Effectiveness of Monetary Policy in Euroland, (1999), Empirica, Vol. 26, pp.299-318 (with Paul De Grauwe and Hans Dewachter)

Chapters in Books

• On the Conduct of Monetary Policy in an Asymmetric Euroland, (1999),in Cobham, D., and G. Zis (eds.) From EMS to EMU: 1979 to 1999 and Beyond, pp. 208-225, Macmillan. (with Paul De Grauwe and Hans Dewachter)
• Are Central European Countries Part of the European Optimum Currency Area, (1999), in De Grauwe, P and Lavrac, V. (eds.) Inclusion of Central European Countries in the European Monetary Union, pp. 13-36, Kluwer Academic Publishers, Dordrecht. (with Paul De Grauwe)
• Die Wirksamkeit der Geldpolitik der Europaeischen Zentralbank und Ihre Abstimmungsregeln, (1999),in Neck, R. and R. Holzmann (eds.) Was Wird Aus Euroland?, pp. 75-96, Manz Verlag, Vienna. (with Paul De Grauwe and Hans Dewachter)
• From EMS to EMU: Are We Better Off?, (2000), in Eichengreen, B. and J. Frieden, The Political Economy of European Monetary Unification, Second Edition, Westview, Boulder. (with Paul De Grauwe and Hans Dewachter)

Book Reviews

• Exchange Rates and The Firm: Strategies to Manage Exposure and the Impact of EMU, by Richard Friberg, (2000), Macmillan Press, in Review of International Economics, 2003, vol. 11(3), pp. 568-570

Recent Working Papers and Work in Progress

• Welfare and Labor Market Consequences of Immigration Policy (2006), (with Ozgur Kibris and Yohanes Eko Riyanto) work in progress.
• Exchange Rates and Fundamentals: Is There a Role for Nonlinearities in Real Time? (2006) (with Kurmas Akdogan).
• Interest Rates and Output in the Long-run (2005), (with Miguel Leon Ledesma), ECB Working Paper, No.434.

Teaching

• Macroeconomics (GDE, BSc Financial Economics, BSc Economic Social Policy, BSc Economics and Statistics)
  Student Material
• International Macroeconomics (MSc Economics)
• Economic Theory and Applications II (MSc Economics)
  Student Material
• Advanced Economic Theory II (MSc Economics)
• Applied Economics and Finance (Adv Certs)
  Student Material