Essays on International Economics

This dissertation focuses on various economic problems of central European countries in transition. Membership in the Economic and Monetary Union (EMU) and an inflow of foreign capital belong to the biggest challenges these countries have to face. The first essay therefore focuses on exchange-rate stability in five new members of the European Union (EU). This stability is not only a criterion for joining the EMU but also a fundamental property of stable economic development. However, there are several factors that could slow or interrupt these countries' EMU-integration process. For this reason, this essay analyzes key factors contributing to euro exchange-rate volatility in the new EU members during the period 1999-2004: economic openness, the "news" factor, and the exchange-rate regime. A TARCH (threshold autoregressive conditional heteroskedasticity) model is employed to model the volatility of exchange rates. Although this essay focuses on each country separately, in general the results suggest that economic openness has a calming effect on exchange-rate volatility, news significantly affects volatility, and flexible regimes experience higher degrees of volatility. The extent of all these effects varies substantially across countries, however. The remaining of this dissertation is then devoted to..