Lucas (1987) argues that the gain from eliminating aggregate fluctuations is trivial. Following Lucas, a number of researchers have altered assumptions on preferences and found that the gain from eliminating business cycles are potentially very large. However, in these exercises little...

We compare the performance of a currency board, inflation targeting, and dollarization in a small, open developing economy with a liberalized capital account. We focus on the transmission of shocks to currency and country risk premia and on the role of fluctuations in premia in the propagation...

No abstract.