Using stochastic simulations, this article analyses the probability distribution of a country's deficit ratio under fixed exchange rates and a variety of monetary and fiscal policy rules. The purpose is to show how the probability of an 'excessive deficit', defined by Europe's Stability Pact as...

Most benefits of the European Community (EC-92) program will probably not come from marginal changes in trade flows. Those changes are important to European policymakers, but are of remote interest to developing countries. The main threats to developing countries are the diversion of investment...

A central issue for international monetary economics is to establish the impact of different exchange rate regimes on inflation performance. This paper addresses a key aspect of this question, how differences in country size affect inflation performance under alternative exchange rate regimes....