This paper develops a dynamic framework in which macroeconomic liberalization and stabilization measures of the type recently seen in Latin America can be studied. The model is sufficiently general to cover both polar cases of a closed capital account and free private capital mobility, so the...

The paper studies the effects of terms-of-trade fluctuations in an infinite-horizon optimizing model of a small open economy. While the current-account response to a transitory terms-of-trade shock is in part explicable by intertemporal smoothing, an important additional factor is the effect of...

The paper uses an intertemporal perfect-foresight optimizing model to analyze the effect of transitory terms-of-trade shocks on a small open . economy's current-account and utility time profiles. An adverse terms-of-trade shift known to be temporary induces the economy to run down its stock of...

This paper studies the macroeconomic effects of an increase in the price of an imported intermediate production input. The framework of the analysis is a small open economy with abating exchange rate and endogenous terms if trade, in which saving depends on residents'(variable) rate of time...