This paper models three alternative policy strategies for an open economy and evaluates their performance. In the first regime national monetary policies are used to achieve domestic price stability, without supporting fiscal policy and without concern for external balance. The second regime...

The paper evaluates some proposals for macroeconomic stabilization in an open economy, which take the form of simple rules. The first rule assigns monetary policy to inflation control and does not require fiscal intervention. The second rule adds fiscal control of a foreign wealth target to the...