Many economists believe that the amount of money in the economy affects either real variables like national output or monetary variables like the price level or both. Developments in monetary aggregates therefore can provide useful information about future price developments. Such a belief has led the European Central Bank to use broad monetary aggregate M3 as a compass for monetary policy strategy. which is aimed at maintaining price stability in the region. A few decades ago many countries had put similar faith in monetary aggregates to guide their monetary policy strategies. However. a few years later empirical evidence began to emerge showing that monetary aggregates were no longer reliable as a tool for conducting monetary policy and consequently many countries abandoned monetary targeting. A possible reason for the monetary aggregates not being as reliable as previously thought is argued, by researchers such as Barnett, to be the simple summation technique of constructing official monetary aggregates. In this kind of aggregation assets as different as cash and interest bearing time deposits are weighted equally. Clearly one hundred pounds in interest bearing time deposits do not provide the same level of monetary services as the equivalent amount in currency. Therefore, the simple summation aggregation technique produces an unsatisfactory definition of the amount of money in the economy. Divisia aggregates derived from microeconomic theory, aggregation theory and index number theory are considered to be a viable alternative to Simple Sum aggregates as in their construction assets are given weights according to the level of monetary services they provide. Since the derivation of Divisia aggregates a number of studies from around the world have compared their empirical performance to their Simple Sum cow1terparts. The results are found to be mixed but leaning slightly in favour of Diyisia aggregates. Since the Euro area has come into existence only. recently. not many studies .; exist that compare the relative performance of Simple Sum and Divisia aggregates for the Euro area. Hence it is the main objective in this thesis to provide new empirical evidence on the relative performance of Simple Sum and Divisia aggregates for the Euro area with a view to adding to the literature on the appropriate method of monetary aggregation. The monetary aggregates are compared in three different frameworks, namely, co integrated V AR money demand framework, composite leading indicator of inflation turning point framework and inflation forecasting framework. Prior to constructing monetary aggregates, however, weak separability tests are carried out to identify assets that can be reliably included in a monetary aggregate. Weak Separability tests are carried out using the Fleissig and Whitney's Linear Programming test. The evaluation of monetary aggregates in cointegrated V AR money demand framework consists of the following steps. Firstly, graphical analysis and unit root tests are carried out to investigate the stationarity properties of the series entering the V AR models. Secondly. given most of the series were found to be nonstationary, Johansen maximum likelihood tests were used for testing for cointegrating relationships. Finally, the long run stability of the parameters of the different cointegrating vectors was investigated. The evaluation of monetary aggregates in the composite leading indicators of inflation consisted of the following steps. Firstly, the cycles of the inflation series and the indicator series are extracted and their turning points identified. Fourier analysis is then used to model the cycles of the series and lead time of the indicator series over the inflation series are identified for constructing a set of short leading indicators and a set of long indicators. The individual leading indicators series are then aggregated to form composite leading indicators of inflation turning point. Kalman filters are the used to filter out false turning points in the composite leading indicators. Evaluation in the inflation forecasting framework consists of constructing linear and nonlinear forecasting models. Linear models are represented by univariate time series models and multivariate cointegrated V AR models. Nonlinear models are represented by neural networks, so called because their creation was inspired by the functioning of the brain. To increase the relevance of this study a few other issues of interest to policymakers are also investigated. These additional issues are: (l) whether or not the UK should join the Euro area, (2) whether or not central banks should use nonlinear models for macroeconomic forecasting, and (3) whether or not Divisia aggregates are disadvantaged compared to Simple Sum aggregates when they are tested in a linear framework, given the presence of nonlinear structures in Divisia aggregates. The main findings of the thesis are as follows: (1) As has been found in many previous studies, findings regarding the relative performance of Divisia and Simple Sum aggregates are mixed, however leaning slightly in favour of weighted Divisia aggregates (2) under present circumstances the UK should not join the Euro area, (3) nonlinear models provide more accurate forecasts of inflation, (4) Divisia aggregates are better modelled in a nonlinear framework. Further work to incorporate the construction of a risk-adjusted Euro Divisia and to optimise the weights of Euro Divisia aggregate using neural networks.

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The central concern of this thesis is to explore whether the euro is challenging the dollar as the top international currency in the international monetary system (IMS) and, if so, whether this is enhancing European monetary power in global monetary governance. The research has been designed so as to develop an empirical adjudication within the ‘euro vs. dollar’ debate taking place in the fields of International Economics and International Political Economy. The study, which develops a constructivist analytical framework concerned with both the material and ideational footprint of the euro, provides evidential support in favour of the euro- sceptic literature. By analysing through extensive fieldwork the perceptions on the euro and the dollar of financial elites in China, the Gulf Cooperation Council (GCC) countries and Brazil, three key dollar-holding regions, this thesis demonstrates that the euro is far from competing with the dollar for the position of top international currency. The lack of a political authority to underpin its monetary space is the central reason for this underperformance. Nonetheless, this thesis also proves that the financial elites in Brazil, China and the GCC are increasingly frustrated about the malperformance of the dollar as the main anchor of the IMS. The euro cannot compete with the greenback for top international currency status, but its consolidation as the second most used international currency has exposed the weaknesses of the dollar. In this regard, the euro does challenge the dollar, as advocated by the euro-optimist literature. Not as a rival, but rather as a mirror that shows the structural and ideological flaws in the current Flexible-Dollar- Standard (FDS). Hence, while the results of this research demonstrate that the euro is incapable of challenging the dollar in a strict material sense, they provide evidence to support the claim that its legacy does so from an ideational point of view by widening the preferences in the construction of the IMS, and the agenda of international monetary governance, away from dollar-unipolarity.

Recent strategy formation process literature has claimed organisations increasingly have to adjust dynamically their characteristics to the requirements of the environment by constantly changing their strategies and strategic capabilities (e.g. Brown & Eisenhardt, 1997; Bartlett & Ghoshal, 1998; Mintzberg, 1994). Behind these claims lies the interest to develop an interdisciplinary view of strategy that captures the interplay between the company and its business environment. This thesis makes a marked contribution to this debate by arguing that a key component in a firm’s strategic response to a change in market conditions is the result of the interpretation people develop about the event itself. It is argued that this development is a context dependent process, with outcomes emerging not merely as a product of bounded rational debates, but also shaped by the interest, commitment, and perception of individual organisational members. This study therefore argues that an understanding of the development of this cognition/action relationship is critical. This research seeks to shed light on the question: “How do managers of multinational firms perceive and respond to the impact of the Euro over time?” A qualitative case study methodology was used to examine the context dependent cognition/action relationship in eight multinational organisations by tracing the intended strategy before the event took place, and compare it with the realised strategy after the Euro was introduced. In total 87 interviews and 16 focus group discussions were conducted to capture the plausible and coherent explanations. Our study suggests the probability of firms introducing new strategies quickly and proactively depends on the anticipation, interpretation and capability of managers to recognise and to exploit changes. Motivation to do so is based on the perceived match or mismatch of the developments with the strategy in use prior to change.