This paper explores optimal monetary policy when current account dynamics is taken into consideration in a sticky-price intertemporal optimising model. It investigates how monetary policies affect current account movement in a two-country model. The main issues addressed include: 1) what factors...

This paper studies episodes of current-account reversal in developing countries (DCs) in the period 1965–1994. First, a number of persistent shifts (“reversalsâ€) in the current-account balance dynamics are identified by structural break and segmented trend tests; then, the...

This paper studies a small open economy with two sectors. In a perfect foresight, rational expectation general equilibrium model, with sticky prices in the non-traded goods sector, the current account responses to monetary shocks depend on the elasticity of substitution between consumption and...