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In this paper we extend the BEER (Behavioral Equilibrium Exchange Rate) approach which identifies an estimated equilibrium relationship between the real exchange rate and economic fundamentals. Here the economic fundamentals are decomposed using Johansen cointegration methods into transitory and permanent components, with the latter used to estimate the Permanent Equilibrium Exchange Rate, or PEER, for the U.S. and Canadian dollars and the pound sterling. The BEER and the PEER move closely together for the U.S. and Canadian dollars and generally track the actual exchange rate. By contrast, for the pound sterling the BEER and the PEER diverge sharply, with the latter following the actual exchange rate quite closely.

Banks and Banking --- Foreign Exchange --- Money and Monetary Policy --- Current Account Adjustment --- Short-term Capital Movements --- Open Economy Macroeconomics --- Interest Rates: Determination, Term Structure, and Effects --- Monetary Systems --- Standards --- Regimes --- Government and the Monetary System --- Payment Systems --- Currency --- Foreign exchange --- Finance --- Monetary economics --- Real exchange rates --- Exchange rates --- Real effective exchange rates --- Real interest rates --- Currencies --- Financial services --- Money --- Interest rates --- United States

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This paper examines the implications of inflation persistence for the inverted Fisher hypothesis that nominal interest rates do not adjust to inflation because of a high degree of substitutability between money and bonds. It is emphasized that the substitutability between nominal assets and capital renders the hypothesis inconsistent with the data when inflation persistence is high. Using a switching regression model, the analysis allows the reflection of inflation in interest rates to vary according to the degree of inflation persistence or forecastability. The hypothesis is supported by U.S. data only when inflation forecastability is below a certain threshold.

Banks and Banking --- Inflation --- Macroeconomics --- Taxation --- Model Construction and Estimation --- Interest Rates: Determination, Term Structure, and Effects --- Price Level --- Deflation --- Taxation, Subsidies, and Revenue: General --- Public finance & taxation --- Finance --- Marginal effective tax rate --- Inflation persistence --- Consumer price indexes --- Real interest rates --- Prices --- Tax policy --- Financial services --- Tax administration and procedure --- Price indexes --- Interest rates --- United States

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The paper suggests that several factors, besides tight monetary policy, may well have contributed to the high real interest rates that have been observed in Israel. The paper examines the impact of unanticipated changes in nominal interest rate monetary policy shocks on a number of variables in Israel. The paper provides evidence that the inflation expectation measure derived from the capital markets tends to overstate the trend in actual inflation. The paper also provides statistical data on the economic indices of Israel.

Banks and Banking --- Foreign Exchange --- Inflation --- Macroeconomics --- Money and Monetary Policy --- Interest Rates: Determination, Term Structure, and Effects --- Price Level --- Deflation --- Monetary Policy --- Macroeconomics: Production --- Finance --- Currency --- Foreign exchange --- Monetary economics --- Population & migration geography --- Real interest rates --- Exchange rates --- Inflation targeting --- Deposit rates --- Financial services --- Prices --- Monetary policy --- Interest rates --- Production --- Economic theory --- Israel

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The paper compares the degree of capital market integration across euro-area countries with that across regions in Italy and provinces in Canada. Analyzing saving-investment correlations, and developing as well as fitting to the data a model of capital flows, reveal no compelling differences between the integration across countries before monetary union and that across the regions or provinces. The evidence does not suggest that EMU will prompt a major reallocation of net capital flows within the euro area that would entail sizable shifts in countries’ equilibrium current accounts.

Banks and Banking --- Exports and Imports --- Finance: General --- Production and Operations Management --- Current Account Adjustment --- Short-term Capital Movements --- International Monetary Arrangements and Institutions --- Financial Aspects of Economic Integration --- Macroeconomics: Production --- Interest Rates: Determination, Term Structure, and Effects --- General Financial Markets: General (includes Measurement and Data) --- International economics --- Finance --- Macroeconomics --- Current account --- Productivity --- Real interest rates --- Capital market integration --- Capital markets --- Balance of payments --- Production --- Financial services --- Economic integration --- Financial markets --- Industrial productivity --- Interest rates --- International economic integration --- Capital market --- Italy

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Israel is on the threshold of a marked improvement in economic performance. Passage of a revised Bank of Israel law along the lines recommended by the Levin Commission and endorsed by the Bank of Israel should be achieved as soon as possible. Continued vigilance regarding real exchange rate trends, conditions of access to international capital markets, and the health of the banking sector is essential. The government is to be commended for its success in liberalizing Israel's foreign trade and capital accounts.

Banks and Banking --- Inflation --- Macroeconomics --- Money and Monetary Policy --- Public Finance --- Price Level --- Deflation --- Interest Rates: Determination, Term Structure, and Effects --- Monetary Policy --- Banks --- Depository Institutions --- Micro Finance Institutions --- Mortgages --- Fiscal Policy --- Debt --- Debt Management --- Sovereign Debt --- Finance --- Monetary economics --- Banking --- Public finance & taxation --- Currency --- Foreign exchange --- Real interest rates --- Inflation targeting --- Fiscal stance --- Prices --- Monetary policy --- Financial services --- Fiscal policy --- Public debt --- Interest rates --- Banks and banking --- Debts, Public --- Israel