The possible emergence of a monetary union in Europe raises a number of new and difficult questions. A central concern is the implication for fiscal policy-making. Fiscal policy assumes an increased importance once the monetary policy instrument is lost. The Delors Report has suggested that...

In this paper we provide an explanation for three features that characterize the Italian savings rate: by international standards, Italy is a `high-saving' country; the Italian savings rate has declined markedly in the last three decades; the correlation between saving and growth is stronger in...

The paper surveys and extends recent results on the effect of changes in government fiscal and financial policy, and in private savings behaviour, on economic growth. Private saving behaviour is represented by an overlapping generations (OLG) model. The supply side of the model permits...

Pre-reform similarities between the ex-German Democratic Republic and Czechoslovakia serve as a basis for comparing two different approaches to marketizing centrally planned economies. The GDR freed trade in goods and fixed the exchange rate first, then liberalized domestic price setting, and...

Recently developed models of exchange rate dynamics emphasize the expectational effects of infrequent intervention. This paper proposes a stylized probabilistic framework in which such effects can be studied along with realistic concerns about the sustainability of the intervention policy. In...

This paper aims to disentangle the correlation between LDC debt and growth in the 1980s. We show that large debt was not an unconditional predictor of slow growth in the eighties and that investment was not abnormally low, when compared with a `financial autarky' rate, calculated in the text. We...

This review article discusses the recent document titled `One Market, One Money' in which the European Commission develops its case for European monetary union. After examining the monetary issues, the article focuses on the reasons for the Commission's very worried attitude toward fiscal policy...

Simple techniques of regulated Brownian motion are used to analyse the behaviour of the exchange rate when official policy reaction functions are subject to future stochastic changes. We examine exchange rate dynamics in cases where the authorities promise (i) to confine a floating rate within a...

Under the assumption of no arbitrage, exchange rate target-zone credibility is tested by whether domestic interest rates fall within `rate-of-return bands' between the maximum and minimum home-currency rate of return on a foreign investment in the absence of a devaluation. Under the assumption...

The effect of labour turnover costs on average employment in a partial equilibrium model of labour demand, depends on the form of the revenue function, on the rates of discount and labour attrition, and on the relative size of hiring and firing costs. If discount and attrition rates are strictly...