This paper uses a two-country version of the global economy model to investigate some costs and benefits of a small, emerging economy's abandoning a flexible exchange rate regime in favor of adopting the currency of its main trading partner. The topic is particularly relevant for countries in...

Data for the G-7 countries strongly support the view that economic activity has a nonlinear effect on inflation, with high levels of activity raising inflation by more than low levels decrease it. In the face of such asymmetries, the average level of output in an economy subject to demand shocks...

This paper presents empirical evidence supporting the proposition that there is a significant asymmetry in the U.S. output-inflation process. The important policy implication of this asymmetry is that it can be very costly if the economy overheats because this will necessitate a severe...