We show that a small set of emerging markets with floating exchange rates expand the investment frontier substantially relative to G10 currencies. The frontier is characterized by an out-of-sample mean-variance efficient portfolio that prices G10- and emerging markets-based trading strategies...

This paper reexamines the choice between fixed and flexible rates to take into account wage indexation and flexible prices. The model employed is of a small open economy faced by monetary and aggregate demand disturbances originating at ham and abroad. Aggregate supply behavior in this &el...

This paper describes the essential similarity between "modern" commercial policy, with its rent-like revenues, and capital transfers. Import barriers are shown to have consequently ambiguous effects on nominal and real exchange rates. The paper also examines some important supply-side welfare...

This paper continues the investigation of the surprisingly slow and weak international transmission of inflation indicated by the Mark III International Transmission Model. The Mark IV Simulation Model is presented. This is a simplified version of the Mark III Model which retains the...

We review ten aspects of how floating exchange rates have worked in practice, contrasted with ten characteristics that the system was supposed to have in theory. We conclude that the foreign exchange market is characterized by high transactions-volume, short-term horizons, and an absence of...

This paper analyzes a nominal anchor exchange rate policy as a domestic distortion, in the tradition of international trade theory. It is shown that, in addition to the problems of sustainability and exit pinpointed in the exchange rate literature, a nominal anchor exchange rate policy, while in...

We develop a modified understand better the 1994 Mexican peso crisis as well as aspects of the European currency crises in 1992-93. We introduce the assumption that the speculative attack is sterilized by the domestic monetary authority, we incorporate a stochastic risk premium, and we allow for...

We argue that allowing for the possibility of a self-fulfilling panic helps in understanding several features of the recent Mexican crisis. Self-fulfilling expectations became decisive in generating a panic only after the government ran down gross reserves and ran up short-term dollar debt. We...