Previous time-series studies have shown evidence of mean-reversion in real exchange rates. Deviations from purchasing power parity (PPP) appear to have half-lives of approximately four years. The long samples required for statistical significance are unavailable for most currencies, however, and...

This paper presents an investigation of the relationship between fiscal policies, fundamental equilibrium real exchange rates and misalignments under fixed nominal exchange rate regimes like those proposed by McKinnon and supply-side fiscal policy. The medium-run effects operate mainly through...

This paper investigates the relation between the rise in external debt and fiscal developments in Greece. We use an intertemporal model of optimal private-sector savings to argue that stabilization of the public debt/GDP ratio will be sufficient to stabilize the external debt/GDP ratio as well....

A democratic society in which the distribution of wealth is unequal elects political parties which tend to represent the interests of the poor. The clientele of such governments favour unanticipated inflation taxes to erode the real value of debt service and redistribute income from the rich to...

While overall inflation has fallen dramatically in countries like Italy and Spain, inflation in the home good sector remains stubbornly higher than inflation in the traded good sector. If nominal exchange rates are fixed, these real appreciations imply an inflation differential with countries...

We extend the `rational-partisan' model of inflation to allow for the effects of unemployment persistence on the dynamics of inflation. We combine this model with the `exchange-rate-regime' model of inflation and examine the experience of the United Kingdom. Outside the fixed exchange rate...

This paper investigates the relation between the dynamics of inflation and exchange-rate regimes. It demonstrates that fixed exchange-rate regimes such as the international gold standard and the Bretton Woods gold-dollar standard appear to be associated with negligible persistence of inflation...

This paper considers alternative modes of stabilization of world-wide and relative levels of public debt. The analysis is in terms of a model of overlapping, infinitely lived households. Three methods are compared: tax finance, public- consumption finance and monetary finance. We show that a...

This paper presents an investigation of the empirical significance of the Lucas Critique for the Phillips Curve. The investigation is carried out with annual historical time series for the United Kingdom (1857-1987) and the United States (1892-1987). The results, for two different models of the...

We analyse the proposed ‘stability pact’ for countries joining a European Monetary Union (EMU). Within EMU shortsighted governments fail to fully internalize the inflationary consequences of their debt policies, which results in excessive debt accumulation. Hence, although in the absence of...