In the first two years of its float, the Australian-U.S. dollar exchange rate has substantially depreciated and oscillated. This paper tests to see whether this exchange rate has, at least, followed a random walk with drift. Having established this benchmark, structural monetary models are...

This paper studies an economy where the labour market does not necessarily clear because real wages are sticky. Wages are fully indexed to prices, and are optimally adjusted over time in response to steady state deviations of output and of inflation. Inflation deviations will arise if wage...