The paper models an adjustable peg exchange rate arrangement as a policy rule with an escape clause under which the timing and magnitudes of realignments are the outcomes of policy optimization decisions. Under the assumptions that market participants are rational, risk averse, and fully...

The merits of rules and discretion for monetary policy are considered when the structure of the macroeconomic model and the probability distributions of disturbances are not well defined. When it is costly to delay policy reactions to seldom-experienced shocks until formal algorithmic learning...

This paper focuses on the portfolio-balance model as a framework for addressing several unresolved issues about the behavior of exchange rates. A major objective is to contribute to an understanding of the relative importance of the different channels through which current account imbalances may...

Although existing models of systematic exchange rate behavior perform little or no better than random-walk models in out-of-sample forecasting tests based on realized values of explanatory variables, this paper finds scope for some optimism that the empirical modeling of exchange rates will...

This paper investigates the effects of fixed versus flexible exchange rates on firms' location choices and on countries' specialization patterns. In a two-country, twodifferentiated-goods monetary model, uncertainty arises after wages are set and prices are optimally chosen. The paper shows that...

Do highly indebted countries suffer from a debt overhang? Can debt relief foster their growth rates? To answer these important questions, this article looks at how the debt-growth relation varies with indebtedness levels, as well as with the quality of policies and institutions, in a panel of...

This paper estimates a small dynamic macroeconomic model for the South African economy with Bayesian methods. The model is tailored to assessing the impact of domestic as well as external shocks on inflation within an inflation-targeting framework, by incorporating forward-looking behavior of...