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Because its actual impact is still rather blurred, the euro brings up many questions among managers as well as gives rise to much marketing research. This paper aims specifically to assess and measure the impact of the euro on the consumer decision process.

This paper first expounds the theory that the currency changeover creates a cognitive and visual bias. Then it moves on to give experimental evidence with a sample of 800 real buyers that, in the French context, the euro currency creates a bias on the different stages of the decision process.

Analysis of covariance (ANCOVA) reveals that euro prices influence the treatment of price information, price perception and, to a more marginal extent, the perception of product value. Individual factors, such as increased experience with the euro, moderate judgmental bias strength.

The results bring out the face value effect of prices, which shows that when unsure of actual price value the consumers turn to nominal value as an anchor for evaluating prices. This paper identifies implications for retailers who have to watch both the overall price range of the items they offer and the price positioning of their own brands in euros and implications for public authorities who have to force consumers to replace price references in the old currency with references in euros.

This research brings out the “magical” or “illusory” effects of prices, while there is only very scant academic evidence available.

The role of money and monetary policy of the central bank in pursuing macroeconomic stability has significantly changed over the period since the end of World War II. Globalization, liberalization, integration, and transition processes generally shaped the crucial milestones of the macroeconomic development and substantial features of economic policy and its framework in Europe. Policy-driven changes together with variety of exogenous shocks significantly affected the key features of macroeconomic environment on the European continent that fashioned the framework and design of monetary policies.

This chapter examines the key basis of the central bank’s monetary policy on its way to pursue and preserve the internal and external stability of the purchasing power of money. Substantial elements of the monetary policy like objectives and strategies are not only generally introduced but also critically discussed according to their accuracy, suitability, and reliability in the changing macroeconomic conditions. Brief overview of the Eurozone common monetary policy milestones and the past Eastern bloc countries’ experience with a variety of exchange rate regimes provides interesting empirical evidence on origins and implications of vital changes in the monetary policy conduction in Europe and the Eurozone.

The purpose of this paper is twofold. First, it estimates the sterilization coefficients for several Caribbean countries. Second, it contributes to the literature by providing a conceptual framework for understanding why regional economies with fully pegged exchange rate regimes have not allowed the money supply to be endogenous to capital flows. This paper notes that a high sterilization coefficient plus a de facto pegged exchange rate indicates the existence of dual nominal anchors.

The paper presents a simple theoretical model to explain this phenomenon. The model combines the liquidity preference of commercial banks with an augmented uncovered interest parity equation.

The econometric evidence presented shows that several Caribbean economies with fixed exchange rate regimes also possess high sterilization coefficients. Given open capital accounts in the various economies, the paper argues that this finding contravenes the money neutrality thesis, which holds that only one nominal anchor can prevail in the long term.

The model emphasizes that the interest rate formation and liquidity preference of oligopolistic commercial banks – the dominant financial institutions in a post‐liberalized setting – prevents counteracting capital movements when monetary policy changes above or along a threshold or bank mark‐up interest rate.

In this article, we survey experiments that are directly related to monetary policy and central banking. We argue that experiments can also be used as a tool for central bankers for bench testing policy measures or rules. We distinguish experiments that analyze the reasons for non-neutrality of monetary policy, experiments in which subjects play the role of central bankers, experiments that analyze the role of central bank communication and its implications, experiments on the optimal implementation of monetary policy, and experiments relevant for monetary policy responses to financial crises. Finally, we mention open issues and raise new avenues for future research.

This paper examines and dissects eight popular conjectures about exchange rates. The conjectures are: there exists a systematic linkage between economic fundamentals and exchange rates; flexible exchange rates are unstable due to destabilising speculation; flexible exchange rates are excessively volatile; the foreign exchange market is efficient; purchasing power parity holds; volatile exchange rates are harmful to trade; depreciating exchange rates trigger a “vicious” inflationary circle; and countries with current account deficits have depreciating exchange rates. The main message is that there is weak theoretical and empirical support for the majority of the conjectures. Only one proposition, relative PPP has strong empirical support but its policy relevance is weakened by the difficulty of interpreting departures from PPP. The remaining group for which there is inconclusive support presents the greatest challenge to research and policy as it includes the first conjecture.

The purpose of this paper is to study if the central bank (BC) communications affect the effectiveness of the monetary policy.

For this analysis, a new Keynesian theoretical model and the ordinary least squared methodology were used. The objective to be achieved was to determine if there is some effect of economic transparency on accountability, inflation average, output gap, interest and central bank credibility.

The results highlighted that central banks with greater transparency contribute to decrease inflation rate and interest rate. The findings denote that an increase in the information quality (clarity) implies a significant change in the rate of readjustment of market expectations. Furthermore, central bank transparency contributes to anchor the public expectations and to affect long‐run interest rates.

Impulse‐answer research was employed to show how the central bank transparency affects the credibility of monetary authorities.

This paper suggests that the central bank publicizes its outlook, its policy monetary decisions, its expectations and its preferences.

The originality of the paper resides in the fact that empirical and theoretical studies were made in the single work. Also, new results were found denoting that economic transparency reduces uncertainty effect and increases the power of incentive contract made between the BC and public.

Notes that macro‐economic policy faces the same challenges in both developing and post‐socialist economies: to reduce inflation while achieving or maintaining stable economic growth. Moreover, there are developing countries like Argentina which succeeded in overcoming a type of institutional chaos which comes quite close to what is to be observed in post‐socialist countries. By looking at the theoretical concept and by its implementation in Argentina, examines the main advantages and flaws of an exchange rate anchor. Shows that this is a high risk strategy for post‐socialist countries which needs radical complementary reforms in order to be effective and to minimize risks. Suggests that credibility cannot be imported.

Indian monetary policy performed reasonably well in the past, while both strategy and operational framework were evolving on par with domestic financial and monetary markets. The purpose of this paper is to document how this good track record came to an abrupt stop in recent years as inflation rose sharply and, more worryingly, expected inflation followed suit.

This paper has analytical, empirical and policy dimensions. Given the recent surge in inflation in India, as well as in inflation expectations, a discussion of the role of monetary policy is needed. This is presented by resorting to survey evidence on expectations as well as to indirect evidence inferred from the market reactions to macroeconomic news.

The authors documented the unhinging of inflation expectations in India in the aftermath of the financial crisis. The evidence gathered leads to the conclusion that both the monetary policy strategy and framework of the Reserve Bank of India would benefit from further evolution in the direction of a precisely defined and overarching objective (price stability), instead of the present multiplicity of goals, and of a well‐defined operating target, enhancing the transparency, communication and signalling effect of policy moves. The authors suggest that embracing a flexible inflation targeting approach is a possible solution.

This is a highly topical issue that has attracted a great deal of attention in policy discussions, both in India and in the region. Very few papers combine the analytical and empirical considerations in this topic.