Aggregate demand for M1 in the countries participating in the exchange rate mechanism (ERM) of the European Monetary System is shown to be a stable function of ERM-wide income, inflation, interest rates, and the ECU-dollar exchange rate. Particularly noteworthy is the rapid dynamic adjustment,...

The pros and cons of institutionalized constraints limiting the freedom of national budgetary policies within an economic and monetary union in Europe are reviewed. The issue is approached from three angles: the influence of EMU on budget discipline, intergenerational equity and intertemporal...

Given a need for disinflation, the adoption of a (semi-)fixed exchange rate policy vis-à-vis a low-inflation country may provide a source of discipline, enhancing the disinflation's credibility and reducing its detrimental impact on the economy. This paper presents empirical evidence that...

Household demand for narrow money in Poland during the 1980s is examined. There were shortages, but informal trade in both goods and foreign exchange was common, and holdings of foreign currency were substantial. Household money demand is first examined at the theoretical level: a representative...

A model of a socialist economy is presented, incorporating bargaining over wages and employment in the socialized sector and shortages that are reflected in the black market. The model is used to analyze the implications of liberalization policies, including trade liberalization, an administered...

Under what circumstances can market forces prevent unsustainable borrowing? Effective market discipline requires that capital markets be open, that information on the borrower's existing liabilities be readily available, that no bailout be anticipated, and that the borrower respond to market...

This paper examines whether shortages may occur in an economy in transition, even for goods whose prices are free. The empirical relevance of this phenomenon is suggested by a case study of Ukraine during 1992. The paper presents a model of enterprise behavior in an environment where key inputs...