The effects of inflation are considered for a small open economy with overlapping generations and a cash-in-advance constraint on consumption. In an endowment economy with one good, the model recovers the adjustment mechanism underlying the monetary approach to the balance of payments, which...

Some recent empirical findings are used to motivate employing a model in which consumption exhibits durability, and habits develop over the flow of services provided by them, in order to study the effects of tariff protection on the current account. Durability leads to adjacent substitutability...