Both analytical models and casual empiricism suggest that the timing of the recessionary costs associated with inflation stabilization in chronic inflation countries may depend on the nominal anchor that is used. Under money-based stabilization, the recession occurs at the beginning of the...

The dependence of the inflation tax on the level of government spending is analyzed in a public finance context. The key feature of the model is that it recognizes the possibility that conventional taxes, such as the consumption tax, carry increasing marginal collection costs. As a result, the...

Constraints on policy variables that are likely to develop in the context of the European Monetary System by 1992 are incorporated into a public finance framework. The effects of such constraints on the optimal use of the inflation and consumption tax are analyzed. Two questions are addressed:...

An optimizing model of dual exchange markets that are incompletely separated owing to the presence of fraudulent transactions is analyzed. The model is used to examine the implications of unanticipated and permanent changes in the commercial exchange rate and government spending. It is shown...

Standard real models predict that a permanent increase in oil prices would result in a current account surplus. The surplus occurs because investment falls while saving remains unchanged. This paper shows that if currency substitution is introduced into the analysis, a permanent increase in oil...

An important obstacle encountered in analyzing interest rate targeting is that standard models usually lead to indeterminacy of the price level or the inflation rate. This paper develops a simple framework that avoids such problems, because the bonds whose interest rate is controlled provide...

Contributing to the debate on the macroeconomic effects of fiscal stimuli, we show that the impact of government expenditure shocks depends crucially on key country characteristics, such as the level of development, exchange rate regime, openness to trade, and public indebtedness. Based on a...

The influential Krugman-Flood-Garber (KFG) model of balance of payment crises assumes that a fixed exchange rate is abandoned if and only if international reserves reach a critical threshold value. From a positive standpoint, the KFG rule is at odds with many episodes in which the central bank...

Over the last 20 years, some financial events, such as devaluations or defaults, have triggered an immediate adverse chain reaction in other countries--which we call fast and furious contagion. Yet, on other occasions, similar events have failed to trigger any immediate international reaction....