Nominal interest rate pegging leads to instability in an IS-LM model with a vertical long-run Phillips curve and backward-looking inflation expectations. However, it does not lead to instability in several large multicountry econometric models, apparently primarily because these models have...

A small macroeconomic model based on familiar theoretical considerations is developed and estimated using data from 31 developing countries. Efficient estimation techniques are used to control for country heterogeneity under the assumption of rational expectations. The estimates and the test...

The dynamic responses of a developing economy to a variety of policy and external shocks are studied using an empirical macroeconomic model which embodies rational expectations, perfect capital mobility, and import rationing. These features, which are relatively new in developing-country...

Observers have often characterized asset markets as being subject to periods of tranquility and periods of turbulence. Until recently, however, researchers were unable to produce closed-form asset pricing formulas in a model environment of time-varying risk. Some work by Abel provided us with...

This paper analyzes the dynamics of the real exchange rate and the price of equity for a small open economy using an optimizing model in which the process of capital accumulation entails adjustment costs. The analysis demonstrates that along an adjustment path toward long-run equilibrium,...

This 2008 Article IV Consultation highlights that problems in the housing and financial markets over the past year have combined to slow the United States’ economy substantially. As the residential investment downturn accelerated and national indices of housing prices started falling, mortgage...

This paper discusses the estimation of models of the term structure of interest rates. After reviewing the term structure models, specifically the Nelson-Siegel Model and Affine Term- Structure Model, this paper estimates the terms structure of Treasury bond yields for the United States with...