This paper presents a model in which economic crises have positive effects on welfare. Periods of very high inflation create the incentive for the resolution of social conflict and thus facilitate the introduction of economic reforms and the achievement of higher levels of welfare. Policies to...

On July 1 the Israeli government adopted a comprehensive emergency program for stabilization and recovery which has had dramatic consequences, at least in the very short-run. Within a few months inflation was down to 1-2 percent a month, foreign exchange reserves were rising rapidly andin spite...

This paper examines the role of output stabilization in the conduct of monetary policy. It argues that activist monetary policy in which the monetary authorities focus on output fluctuations in the setting of their policy instrument and in policy statements is likely to produce worse outcomes...

High and persistent inflation has been one of the distinguishing macroeconomic characteristics of many developing countries since the end of World War II. Countries afflicted by chronic inflation, however, have not taken their fate lightly and have engaged in repeated stabilization attempts....

This paper describes a class of stochastic stabilizing policies within asset price regimes that can be easily incorporated into the framework of regime switching recently proposed by Froot and Obstfeld (1991). In contrast to previous treatments of market-driven fundamentals within the regime,...

This paper analyzes two-way interactions between structural reform and macro policy. If structural reforms increase the flexibility of labor markets, they are likely to improve the short-run inflation-unemployment tradeoff, providing an incentive for policymakers to expand aggregate demand....

When a stabilization has significant distributional implications (as in the case of tax increases to eliminate a large budget deficit) different socio-economic groups will attempt to shift the burden of stabilization onto other groups. The process leading to a stabilization becomes a "war of...

There is a well-known set of empirical regularities that describe the experience of countries that peg their exchange rate as part of a macroeconomic adjustment program. Following the peg economies tend to experience an increase in GDP, a large expansion of production in the non-tradable sector,...

This paper reviews the experience of Latin American countries with structural reforms, and discusses the relationship between macroeconomic stabilization and trade liberalization programs undertaken in the region since the early 1980s. The problem of sequencing of stabilization and structural...

In late 1979, Turkey stood in the throes of a foreign exchange crisis, with widespread shortages, negative growth, and inflation into triple digits. A decade later, Turkey has a comfortable balance-of-payments situation, and sits atop considerable foreign exchange reserves. The economy has...