A stochastic, two-country, neoclassical, rational-expectations model with sticky prices--optimally set by monopolistically competitive firms--and possible excess capacity is developed to examine international spillover effects on output of monetary disturbances. The Mundell-Fleming model...

How should countries like Poland or the U.S.S.R. move toward price flexibility, gradually or in a "big bang"? Why is it that Governments committed to eventual price flexibility so often seem to be unable to let go of "temporary" controls? How can one explain that after price increases early in a...