Intertemporal models of the current account suggest that temporary income shocks are fully reflected in a country's net foreign asset position, so that agents invest abroad any savings generated by a positive income shock. On the other hand, a stylised fact in international economics is that...

During the second half of the 1990s the US economy was characterised as the Goldilocks economy: not too hot, nor too cold, but just right. It was argued that this represented a new paradigm, enabling unemployment to remain low without igniting inflationary pressure. In this paper the evidence...

This paper explains what is meant by the concept of equilibrium exchange rates. It argues that a variety of equilibrium exchange rates can be defined and their behaviour will vary according to different definitions of the exchange rate, and over short, medium and long-term horizons. It...

How do economic policy mistakes happen? One view is that policy makers are benevolent, and errors arise because economic theories are inadequate. Another is that policy makers pursue sectional interests that may have no relation to any academic consensus on good policy. This paper examines a...

In this paper we present two examples where the presence of inflation persistence could influence the qualitative nature of monetary policy. In the first case the desirability of a monetary policy regime comes under question when extensive inflation persistence exists. In the second case the...