Sticky price monetary models of exchange rates, while reasonable theoretically, have been disappointing empirically. Out-of-sample predictions have been little or no better than those from a naive model of no change. The most likely reason is that shocks to the market's expectation of the future...

This article finds that even in the 1980's, when barriers to international capital mobility had been largely eliminated, there was no measurable tendency for real interest rates between the U.S. and the major industrial countries to converge. Moreover, the estimated short-run responses of both...

This paper reviews recent progress in applying information-theoretic tools to long-standing exchange rate puzzles. I begin by distinguishing the traditional public information approach (e.g. monetary models, including new open economy models) from the newer dispersed information approach. (The...

I review the case for pegging the exchange rate by surveying the recent theoretical literature on the choice of exchange rate regimes. This literature suggests that by enhancing the transparency or controllability of monetary policy, pegging may be more effective in lowering inflation...