Constraints on policy variables that are likely to develop in the context of the European Monetary System by 1992 are incorporated into a public finance framework. The effects of such constraints on the optimal use of the inflation and consumption tax are analyzed. Two questions are addressed:...

Exchange rate-based stabilizations in chronic-inflation countries have often been characterized by an initial consumption boom (which is most evident in the behavior of durable goods) followed by a later contraction. This paper provides an explanation for such a boom-recession cycle based on the...

The relationship between the degree of wage indexation chosen by private agents and the degree of public debt indexation chosen by the government is examined. It is shown that the government is likely to increase public debt indexation in response to an increase in wage indexation. By contrast,...

Since the 1970s, a number of high-inflation Latin American countries have experienced persistent "dollarization." To interpret some of the stylized facts, a simple model is presented in which dollarization reflects the costs that are involved in switching the currency denomination of...

The role of debt maturity in managing the government's incentives to use opportunistic inflation to reduce the ex post real value of its nominal liabilities is explored. The maturity structure of government debt is shown to be a powerful instrument for affecting the time profile of the inflation...

Our analysis shows a number of interesting empirical regularities. First, when we apply a simple definition of sudden stops, we find that they have been a fairly common occurrence at least since the late 1970s. Second, economic performance after a sudden stop can differ dramatically across...

This paper examines the 'prudential' role of reserve requirements in transition economies using a general-equilibrium banking model. The analysis stresses the role that reserve requirements may play in enforcing an adequate level of bank capitalization in a context in which it is difficult to...