This paper analyses four costs which may be associated with monetary union. First it (obviously) allows no `relative' monetary accommodation of the kind which may assist when dealing with asymmetric shocks. This can impose significant adjustment costs. Second it does not of itself prevent...

A North-South growth model is presented which focuses on i) the complementarity of Southern output (consumption goods) and Northern output (capital goods) and ii) the terms of trade as a mechanism linking the growth rates of the two regions. This Kaldorian model is different from recent...

We analyse the stability of countries within a monetary union in the face of asymmetric shocks, using a simple but widely applicable model. We show that members of the union may be subject to severe, and possibly unstable, cycles following asymmetric shocks if there is a significant backward...

This paper considers the issue of whether a small developing economy such as Hong Kong faces a perfectly elastic demand for its exports of manufactured goods. We construct a simultaneous demand and supply system which is estimated using Full Information Maximum Likelihood methods, and which...

We analyse optimal discretionary games between a benevolent central bank and a myopic government in a New Keynesian model. First, when lump-sum taxes are available and public debt is absent, we show that a Nash game results in too much government spending and excessively high interest rates,...

There is a thriving debate on the usefulness of economic models for policy analysis which this paper explores. It argues that there is a need for models that incorporate both the modern intertemporal approach to macroeconomics and short-run ad-hoc behaviour. This need cannot be met by the simple...

In this paper we discuss the emergence of the new European macroeconomic structure within EMU. We focus on three important elements: the wage-fixing authorities in each country, the fiscal authorities in each country, and the single European Central Bank (ECB). We identify serious problems which...

This article examines the new consensus that fiscal policy should have no macroeconomic role in 'flexible inflation targeting' regimes. There is little basis for this presumption. Fiscal policy remains important in setting the policy mix and in managing shocks and imbalances. The credibility of...

Analyses of the Asian crisis of 1997 have focused excessively on the financial sector, especially the banks. The role of the real sector in exposing the financial system to stress has been under-emphasized. This paper provides a real-sector explanation for Thailand's crisis, demonstrating the...