This paper presents and applies an integrated framework to assess the consistency between fiscal deficits and other macroeconomic targets, such as output growth and the rate of inflation. The model centers around the government budget constraint and can be used to either derive the financeable...

In this paper we present a model of a balance-of-payments crisis and use it to examine the Argentine experiment with a crawling peg between December 1978 and February 1981. The approach taken allows us to examine the evolution of a crisis when the collapse is not a perfectly-foreseen event. The...

Using an intertemporal, two-country general equilibrium model, I demonstrate that international asymmetries in expenditure patterns determine the real exchange rate effects of capital controls. Capital import taxes lower world interest rates, but raise home interest rates. These changes in...

Brazil, Argentina and Israel all used price controls as part of disinflation programs in 1985-1986. In each case they were intended to break an "inertial" component of inflation. This paper focuses on a specific mechanism through which inflation inertia can emerge: the interaction between lack...

This paper deals with the dynamics of trade and capital account liberalization in a developing country. The welfare consequences of trade and capital account liberalization under alternative sequencing scenarios are investigated. We draw on standard trade theory results to show that the opening...

Wage and price controls have a long and somewhat disreputable history, presumably because of their frequent use in many countries as short run substitutes for measure~ with more lasting effects on the inflation rate. But, in 1985 and 1986, Argentina, Brazil, and Israel used extensive wage-price...

The analysis focuses on the government budget constraint and the resolution of inconsistent implications of different policy instruments under that constraint. We show how, under floating exchange rates, external shocks or internal structural reforms may cause jumps in inflation and the exchange...

Using a standard complete specialization model of a small open economy within a rigorous intertemporal optimization framework with contract- based wage rigidity, we show that permanent tariffs may lead to a current account deterioration and a fall in employment, contradicting most of the...

In this paper we investigate the relation between tariff changes, terms of trade changes and the equilibrium real exchange rate. For this purpose we use two models of a small open economy: (1) a three goods version of the Ricardo-Viner model; and (2) a three goods model with full intersectoral...

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...