Rapid credit growth in Bulgaria, Romania, and Ukraine has been driven by successful macroeconomic stabilization, robust growth, and capital inflows. While financial deepening is both expected and welcome, the recent expansions appear to have been excessive, as evidenced by widening current...

This paper discusses how the choice of central banks' operating targets influences the use of their monetary policy instruments and how the latter affect the central bank's balance sheet. This is of particular interest, since the monetary conditionality in IMF-supported programs has...

This paper provides some practical advice on establishing initial conditions in support of an inflation-targeting monetary framework. These conditions are divided into four areas: a mandate in support of an inflation objective and accountability for achieving this objective; macroeconomic...

This paper develops a new framework for the process of money supply. In contrast to models like McCallum (1989) based on the money multiplier analysis or the credit market models of Brunner and Meltzer (1966, 1973) our model explicitly illustrates the interaction of non-banks, banks and the...

For the open economy the workhorse model in intermediate textbooks still is the Mundell-Fleming model, which basically extends the IS-LM model to open economy problems. The purpose of this paper is to present a simple New Keynesian model of the open economy, that introduces open economy...

The empirical performance of macroeconomic exchange rate models is more than disappointing. This dismal result is also reflected in the forecasting capabilities of professional analysts: all in all, analysts are not in a position to beat naive random walk forecasts. The root for this deficient...

The study analyses the characteristics of professional exchange rate forecasts for the €/US-$ rate. The results indicate that the quality of forecasts produced by professional economists is rather poor and incompatible with the rational expectations hypothesis. This dismal result is according...