This paper reviews the monetary transmission mechanism in low income countries (LICs). We use monetary transmission in advanced and emerging markets as a benchmark to identify aspects of the transmission mechanism that may operate differently in LICs. In particular, we focus on the effects of...

In this Paper, we look at the role of money in a general framework that encompasses three competing environments: the New Keynesian model with separable utility and static money demand; the non-separable utility variant with habit formation; and the New Keynesian model modified to allow for...

A central tenet of inflation targeting is that establishing and maintaining well-anchored inflation expectations are essential. In this paper, we reexamine the role of key elements of the inflation targeting framework towards this end, in the context of an economy where economic agents have an...

This paper develops a welfare-based model of monetary policy in an open economy. We focus on the extent to which monetary policy should be employed in maintaining the exchange rate. The traditional approach maintains that exchange rate flexibility is desirable in the presence of real...

This paper studies monetary policy games in a two-period Mundell-Fleming model, under a regime of managed exchange rates. A regime of managed exchange rates is defined as one where exchange rates are pegged but bilateral parities can be changed from time to time. The paper argues that such a...

This paper considers the effects of monetary and fiscal policies in an optimizing model with capital accumulation and finite lives. An increase in monetary growth is no longer superneutral in a money-capital economy, but leads to a reduction in the real interest rate and increases in the capital...

After a brief review of classical, Keynesian, New Classical and New Keynesian theories of macroeconomic policy, we assess whether New Keynesian Economics captures the quintessential features stressed by JM Keynes. Particular attention is paid to Keynesian features omitted in New Keynesian...

In this Paper we present a model that combines the second-generation trade-off between costs of maintenance and abandonment with possible balance-sheet problems in the corporate sector. We show how debt levels can move a small economy from a fixed exchange rate to a floating exchange rate...

This paper analyses the costs and benefits of European monetary unification. The benefits take the form of the reduction in exchange risk, equalization of interest rates, decline in relative price variability and general increase in economic efficiency likely to accompany unification. The costs...

This paper analyses and compares the effects of common demand and supply shocks on the setting of optimal monetary policies under a clean float, a managed exchange rate system (such as the EMS) and a monetary union, when welfare depends on unemployment and the cost of living. The results suggest...