This paper studies the optimal asset allocation problem of an investor with a portfolio given by the U.S. risk-free asset and a carry trade benchmark comprising the currencies of the G10 countries. Our optimal strategy is able to adapt to macroeconomic conditions and avoid the so-called crash...

A key issue in monetary policymaking is the time inconsistency problem confronting central banks. The impact of openness on inflation enables testing this rule versus discretion debate. This study examines the effect of openness and exchange rate regimes on inflation for 137 countries from 1999...