There is a tension between pre-float instincts that a more disciplined monetary policy should diminish exchange rate volatility with the apparent reality that macroeconomic fundamentals do not drive G3 exchange rates in the short-run. The recent movement towards greater transparency in monetary...

Observers have relied increasingly on simple reaction functions, such as the Taylor rule, to assess the conduct of monetary policy. Applying this approach to deflationary or near-zero inflation environments is problematic, however, and this paper examines two shortcomings of particular relevance...

The effectiveness of fiscal policy in Japan over the past decade has been a matter of great controversy. We investigate the effectiveness of Japanese fiscal policy over the 1976-1999 period using a structural VAR analysis of real GDP, tax revenues, and public expenditures. We find that...