Includes bibliographical references and index.

Part I. Exchange rate economics -- Chaos in the Dornbusch model of the exchange rate / Paul De Grauwe and Hans Dewachter -- Heterogeneity of agents, transactions costs and the exchange rate / Paul De Grauwe and Marianna Grimaldi -- Exchange rate puzzles: A tale of switching attractors / Paul De Grauwe and Marianna Grimaldi -- Exchange rates in search of fundamentals: The case of the euro-dollar rate / Paul De Grauwe -- Exchange rates and fundamentals: A non-linear relationship? / Paul De Grauwe and Isabel Vansteenkiste -- The impact of FX central bank intervention in a noise trading framework / Michel Beine, Paul De Grauwe and Marianna Grimaldi.

Part II. Monetary integration -- Conditions for monetary integration: A geometric interpretation / Paul De Grauwe -- Is Europe an optimum currency area? Evidence from regional data / Paul De Grauwe and Wim Vanhaverbeke -- Setting conversion rates for the third stage of EMU / Paul De Grauwe and Luigi Spaventa -- The euro and financial crises / Paul De Grauwe -- What have we learnt about monetary integration since the Maastricht treaty? / Paul De Grauwe -- The governance of a fragile eurozone / Paul De Grauwe -- Do asymmetries matter for European monetary policy? / Yunus Aksoy, Paul De Grauwe and Hans Dewachter.

Part III. Macroeconomics and monetary policy -- Is inflation always and everywhere a monetary phenomenon? / Paul De Grauwe and Magdalena Polan -- Monetary policy and the real economy / Paul De Grauwe and Claudia Costa Storti -- Lessons from the banking crisis: A return to narrow banking / Paul De Grauwe -- The scientific foundation of dynamic stochastic general equilibrium (DSGE) models / Paul De Grauwe -- Animal spirits and monetary policy / Paul De Grauwe -- Booms and busts in economic activity: A behavioral explanation / Paul De Grauwe.

The book covers problems relating to international macroeconomics and international finance. The first part develops new approaches to exchange rate modeling. The second part is a collection of papers on the theory and empirical analysis of monetary unions. The third part contains criticism of the mainstream macroeconomic models and proposes alternative modeling approaches --