We model a typical Asian-crisis-economy using dynamic general equilibrium tech-niques. Exchange rates obtain from nontrivial fiat-currencies demands. Sudden stops/bank-panics are possible, and key for evaluating the merits of alternative ex-change rate regimes. Strategic complementarities...

We examine the accuracy of survey-based expectations of the Chilean exchange rate relative to the US dollar. Our out-of-sample analysis reveals that survey-based forecasts outperform the Driftless Random Walk (DRW) in terms of Mean Squared Prediction Error at several forecasting horizons. This...

Central banks have a long tradition of minimizing their exposure to credit-risk. The Federal Reserve’s response to the recent financial crisis, which entailed greater risk-taking, has raised the question of whether such ‘unusual’ practices are desirable. This paper addresses the vacuum in...

When central banks announce cuts to future interest rates, the expected costs of government debt service decrease, generating additional resources in future budgets. This paper demonstrates that if the rational-expectations assumption is dropped, fiscal authority can exploit those gains by...

The banking sector plays a pivotal role in the economic development and stability of a country, particularly in developing nations like India, where financial systems are predominantly bank-based. Banks act as primary financial intermediaries, converting deposits into productive investments,...

Conventional empirical models of monetary policy transmission in emerging market economies produce puzzling results: monetary tightening often leads to an increase in prices (the price puzzle) and depreciation of the currency (the FX puzzle). We show that incorporating forward-looking...

Conventional empirical models of monetary policy transmission in emerging market economies produce puzzling results: monetary tightening often leads to an increase in prices (the price puzzle) and depreciation of the currency (the FX puzzle). We show that incorporating forward-looking...

This note takes part in the debate on the topic “a macroeconomics without LM”. It shows that, when the central bank does not control directly the interest rates on the money and financial markets, LM curve has another role to play than to determine in an endogenous way the money supply when...

The mainstream inflation-targeting literature makes the strong assumption that the central bank can exactly target the interest rate which affects investment and consumption decisions and hence the money supply plays no role in the monetary policy strategy. This assumption is equivalent to...

In a New Keynesian model with asymmetric information we show that publication of macroeconomic projections and of the future interest rate path by the central bank can improve macroeconomic outcomes. However, the gains from publishing interest rate paths are small relative to those from...