This paper derives optimal weights for current-account and reserve indicators for adjusting the exchange rate (a "crawling peg"). Keven (1975)showed that use of a current account indicator alone would not stabi1iereserves, while a reserve indicator results in unstable fluctuations in the...

This paper studies the value of broad commodity price indexes as predictors of consumer price inflation in the G-7 industrial countries. After an introduction, the paper discusses the theoretical relationship between commodity and consumer prices and the conditions under which, in general, one...

If price decisions are taken neither continuously nor in perfect synchronization, the process of adjustment of all prices to a new nominal level will imply temporary movements in relative prices. It might then well be that, to avoid these movements in relative prices, each price setter will want...

A framework is developed for macroeconomic policy analysis in four countries of Central Europe (CE) in transition to EU membership (Czech Republic, Hungary, Poland, and Slovakia). A Multi-Annual Fiscal Adjustment Strategy (MAFAS) and a Pre-Pegging Exchange Rate Regime (PPERR) appropriate for...

The Economic Recovery Tax Act of 1981 had one aspect that is unusually useful for economic analysis. It provided an example of a clear-cut announcement of future policy actions at specified dates.This provides an opportunity to apply recent advances in the analysis of expectations dynamics to...

This paper investigates the importance of markup behavior in Japanese manufacturing. According to the evidence presented, Japanese firms have varied the markups of prices over marginal costs in order to limit the effects of exchange rate changes on output. This behavior is quite different from...

During the fifteen years since 1970, the theory of exchange-rate determination has been completely transformed. In the late 1960s, the standard model of the foreign exchange market had supply and demand as stable functions of exports and imports, with the expection that a floating rate would...

Two of the puzzling macroeconomic phenomena of the 1970s have been the persistent stagnation in Europe, and the disagreement between the U.S. and Europe on the feasibility of recovery by demand expansion. This paper develops the hypothesis that the source of both the stagnation and the policy...

With the major currencies continuously moving (if not floating freely) against each other, a country that does not choose to float must decide what to peg to. If it pegs to the SDR it floats against all currencies. Thus in the system begun in the early 1970s the very concept of a fixed exchange...

During the 1970s an extensive theoretical literature has developed analyzing market determination of freely floating exchange rates. At the same time, there has been extensive and continuous intervention in the market by central banks. Exchange rates have not been floating freely;they have been...