Dynamic open economy models with time-separable, deterministic utilities fail to account for observed dynamics of exchange rates and international relative prices and quantities. This paper examines the ability of extensions of existing open economy models to account for exchange rates,...

The authors investigate an international monetary business-cycle model in which agents face monetary policy processes that incorporate regime shifts. In any given period agents cannot directly observe the policy regime, but instead form beliefs that are updated via Bayesian learning. As a...

This paper examines monetary regime switching in Canada and the United States and the implications of regime switching for exchange rates and key nominal and real macroeconomic aggregates for the two countries. Evidence of Markov regime switching in the process governing monetary base growth and...