Exchange-rate management is possible only if the government pursues consistent monetary and fiscal policies. The authors constructa model in which the real consequences of exchange-rate management depend on the precise time pattern of these policies. The authors study the constraints on feasible...

Why did Finland experience, in 1991-1993, the deepest recession observed in an industrialized country since the 1930s? Using a dynamic general equilibrium model with labor frictions, we argue that the collapse of the Soviet-Finnish trade was a major contributor to the contraction. Finland's...

Financial crashes were followed by deep recessions in the Sudden Stops of emerging economies. An equilibrium business cycle model with a collateral constraint explains this phenomenon as a result of the amplification and asymmetry that the constraint induces in the responses of macro-aggregates...