There are two main forces behind the large US current account deficits. First, an increase in the US demand for foreign goods. Second, an increase in the foreign demand for US assets. Both forces have contributed to steadily increasing current account deficits since the mid-1990s. This increase...

In early 1990, Argentina, Brazil, Peru, Yugoslavia and Poland were experiencing extreme instability or, at least, the early stages of stabilization. Other countries, like Bolivia, had already run the course and stabilized or, like Mexico, had avoided the extreme experience and opted for...

This paper investigates the roles played by the global macroeconomic environment and by Brazilian policy in shaping the Brazilian debt crisis, and assesses the prospects for Brazil's sovereign debt after five years of the `muddling-through' strategy. We first examine Brazilian debt from a...

The tradition in discussions of stabilization is to assume that fiscal austerity, competitive real exchange rates, sound financial markets and deregulation provide the preconditions for a resumption of growth. There is, however, a need to distinguish the necessary and the sufficient conditions....

The paper investigates four challenges to exchange rate stability in the coming years and explores their implications for macroeconomic and exchange rate policy. The first section explores the importance of seigniorage in financing the government budget in Southern European countries. The second...

This paper discusses a number of issues that the newly constituted board of the European Central Bank (ECB) will face early on. We show how conducting a European monetary policy is very different from living under the protective umbrella of the Bundesbank. We discuss voting on the ECB board, and...

When governments attempt stabilization why do they not undertake a programme certain to succeed? The paper discusses credibility when it is inconceivable that a programme will succeed with probability one. A cost-benefit analysis establishes an equilibrium programme that has some ex ante...

The monetary overhang, pervasive with price controls and shortages in Eastern Europe and the Soviet Union, offers close parallels to the post-1945 picture of Europe. At that time monetary reform was used in many countries, in one form or another, to bring liquid assets in line with the...