This paper models the behaviour of a potential entrant into a monetary union where there is an inflation entry condition. In addition to making a monetary policy decision during a qualifying period, the potential entrant must make a decision about structural reform. The paper shows that the...

We model an accession country facing a Maastricht-type inflation criterion that specifies an inflation ceiling. In addition to deciding whether or not to satisfy this criterion, the country must decide how much costly economic reform to undertake. If the country puts enough weight on the future...

The ineffectiveness of real devaluation as a stabilization policy does not imply that the nominal exchange rate should be held constant in the face of a domestic inflation. In this circumstance, import duties and export subsidies would have to be escalated to counter the potential erosion of the...

In several recent papers macroeconomic policy has been modelled in the context of a game of incomplete information. A central result of the work by Backus and Driffill and by Barro is that the uncertainty may provide an incentive for the government to maintain a socially efficient policy of zero...

This paper is a selective survey of new or recent methods to extract information about market expectations from asset prices for monetary policy purposes. Traditionally, interest rates and forward exchange rates have been used to extract expected means of future interest rates, exchange rates...

This paper examines the distribution of output around capacity when money demand is a non-linear function of the nominal interest rate such that nominal interest rates cannot become negative. When fluctuations in output result primarily from disturbances to the money market, the variance of...