In this paper we demonstrate that exchange rate regime switching is compatible with optimal government policies. Nominal exchange-rate regimes are formalized as equilibrium commitments on future seigniorage policies, and the collapse of an exchange-rate peg as an excusable default which allows...

During the 1980s, many OECD countries adopted labor-market policies designed to enhance wage flexibility and reduce unemployment. They also attempted to bolster the credibility of their anti-inflation measures through exchange rate and fiscal policies. These measures should have lowered the...

This paper analyzes whether capacity utilization in manufacturing is a reliable inflation indicator over and above economy-wide indicators of inflationary pressure and examines different theories on the propagation of inflation by testing their implications for the relationship between capacity...