Analyses of the political economy of exchange-rate policy posit that firms and individuals in different sectors of the economy have distinct policy attitudes toward the level and the stability of the exchange rate. Most such approaches hypothesize that internationally exposed firms prefer more...

Two main views of exchange rate determination have evolved since the early 1970s: the monetary approach to the exchange rate (in flexible-price, sticky-price, and real interest differential formulations); and the portfolio balance approach. The literature on these views is surveyed, followed by...

The macroeconomic effects of a variety of exogenous and policy-induced real disturbances are examined under the assumption that the authorities target the level of the real exchange rate. We first discuss the implications--particularly for inflation and the current account--of targeting the rate...

The issue of whether government capital is productive has received a great deal of attention recently, yet empirical analyses of public capital productivity have generally been limited to the official capital stock estimates available in a small sample of countries. Alternatively, many...

The issue of whether government capital is productive has received a great deal of attention recently, yet empirical analyses of public capital productivity have generally been limited to the official capital stock estimates available in a small sample of countries. Alternatively, many...

The relationship between temporary terms of trade shocks and household saving in developing countries is examined. It is first shown that, from a theoretical standpoint, this relationship is ambiguous: private saving may rise or fall in response to a transitory terms of trade shock, depending on...

A structural import demand equation is derived and estimated for a large number of countries, using recent time-series techniques that address the problem of nonstationarity. The average price elasticity is close to zero in the short run but is slightly higher than one in the long run. A similar...

Uncertainty about the export earnings accruing to a country (sometimes referred to as export instability) is an important source of macroeconomic uncertainty in many developing countries. Theory predicts that countries should react to increases in this form of uncertainty by increasing their...

The relationship between real interest rates, saving, and growth is a central issue in development economics. Using macroeconomic data for a cross-section of countries, we estimate a model in which the intertemporal elasticity of substitution varies with the level of wealth. The estimated...

Evans (1991) has demonstrated that Blanchard's (1985) finite-horizon model obeys approximate Ricardian equivalence. This paper shows that this result is determined largely by an unrealistic assumption that labor income grows monotonically over the consumer's entire lifetime. With more realistic...