For the open economy, the workhorse model in intermediate textbooksstill is the Mundell-Fleming model, which basically extends theinvestment and savings, liquidity preference and money supply (IS-LM)model to open economy problems. The authors present a simple NewKeynesian model of the open...

The actual mainstream view of academics emphasizes the so-called \"two-corner solution\" with either completely fixed or independently floating exchange rates. We will argue in this paper that the requirements for fixed rates are rather too restrictive to be successful. On the other hand, the...

Although there seems to be a broad consensus among economists that purely floating or completely fixed exchange rates (the so-called corner solutions) are the only viable alternatives of exchange rate management. many countries do not behave according to this paradigm and adopt a strategy within...

Although the IS/LM-AS/AD model is still the central tool of macroeconomic teaching in most macroeconomic textbooks, it has been criticized by several economists. Colander (1995) demonstrated that the framework is logically inconsistent. Romer (2000) showed that it is unable to deal with a...

Due to the severity of the financial market crisis most central banks reached the limits of their traditional monetary policy instruments and relied to a very large extent on instruments of unconventional monetary policy. In our paper we develop a simple theoretical framework for the money...

The paper discusses the strong output decline in the countries of Central and Eastern Europe. It starts from the puzzling observation that the former CSFR, Hungary and Poland experienced a relatively similar decline in output in spite of completely different stabilization and transformation...

The first part of the paper analyzes the inflationary risks associated with price liberalization, the welfare costs of inflation and the difficulties of East European central banks in pursuing non-inflationary policies. The main obstacles are the low credibility of stabilization policies and a...

This paper develops a new framework for the process of money supply. In contrast to models like McCallum (1989) based on the money multiplier analysis or the credit market models of Brunner and Meltzer (1966, 1973) our model explicitly illustrates the interaction of non-banks, banks and the...

The paper compares the experience with shock therapies in East Germany, Poland and the CSFR. After an analysis of the individual starting conditions and economic performance since the inception of comprehensive reform programmes it focuses on the specific elements of the East German reform...