The simultaneous occurrence of devaluation and recession in Mexico in 1995, as well as in the East Asian economies more recently, appears to contradict the conventional view that devaluations are expansionary. Moreover, a sizeable theoretical and empirical literature also argues that, contrary...

This paper assesses some of the explanations that have been put forward for the global pattern of current account imbalances that has emerged in recent years: in particular, the large U.S. current account deficit and the large surpluses of the Asian developing economies. Based on the approach...

The objectives of this paper are to determine the extent to which various factors contributed to the current recession in Japan and to assess whether the recent behavior of the Japanese economy differs from that in previous recessions. Toward that end, we develop a small, structural...

According to conventional models, flexible exchange rates play an equilibrating role in open economies, depreciating in response to adverse shocks, boosting net exports, and stimulating aggregate demand. However, critics argue that, at least in developing countries, devaluations are more...

This paper assesses the empirical merits of PcGets and Autometrics--two recent algorithms for computer-automated model selection--using them to improve upon Kamin and Ericsson's (1993) model of Argentine broad money demand. The selected model is an economically sensible and statistically...

Argentina became highly "dollarized" during its hyperinflations of 1989 and early 1990. Although inflation has returned to very low rates, a high degree of dollarization has persisted during the early 1990s, counter to what the currency substitution hypothesis predicts. This paper provides new...

This paper addresses three questions about the prospects for the U.S. current account deficit. Is it sustainable in the long term? If not, how long will it take for measures of external debt and debt service to reach levels that could prompt some pullback by global investors? And if and when...

This paper describes research comparing the response of inflation to changes in exchange rate competitiveness in various regions of the world. The paper first presents evidence that an empirical relationship between the rate of inflation and the level of the real exchange rate, which was...

This paper addresses the impact of monetary policy on exchange rates during financial crises. Some observers have argued that a tightening of monetary policy is necessary to stabilize the exchange rate, restore confidence, and lay the groundwork for an eventual recovery of economic activity....

This paper uses Bayesian techniques to compare three definitions of optimality for the basic job search model: the standard income-maximizing definition, an approximation to the standard definition, and a simple alternative. The important role of prior choice in these comparisons is illustrated....