Testable implications of the basic intertemporal model of current account determination are almost always rejected by the data. We confirm these rejections for a sample of post-war Canadian data, then account for them by calibrating and simulating a small open economy, real business cycle model....

We argue that the fiscal policies adopted early in World War I by the U.K. were responsible for its poor economic performance during the interwar period. In September 1915, the U.K. embarked on a set of non-tax-smoothing policies collectively known as the McKenna rule. The key dictum of the...