To examine whether a country's exchange rate regime has any impact on inflation and growth performance in transition economies, the authors develop an empirical framework that addresses some of the main problems plaguing empirical work in this strand of the literature: the Lucas critique, the...

Estimating the degree of exchange-rate misalignment remains one of the most challenging empirical problems in an open economy. The basic problem is that the value of the real exchange rate is not observable. Standard theory tells us, however, that the equilibrium real exchange rate is a function...

The impact of uncertainty on investment has attracted considerable attention in the analytical and empirical macroeconomic literature. In theory, however, uncertainty can affect investment through different channels, some of which operate in mutually opposing direction. So, the sigh of its...

The authors exploit three-dimensional panel data on prices for twenty seven traded goods, over eighty eight quarters, across ninety six cities in Japan, and the United States, to answer several questions: 1) Does the average exchange rate between countries stray further from zero, than that...

Between 1990 and 2001 the Argentine peso appreciated by 80 percent in real terms, and its overvaluation has been singled out as one of the main suspects in the debate on the causes of the Argentina collapse of late 2001. This paper assesses the degree of real misalignment in Argentina over the...

Despite a trend toward more flexible rates, more than half the world's countries maintain fixed or managed exchange rates. In the 1980s and 1990s, developing countries as a group progressively liberalized their trade regimes, but some governments defend their exchange rate in actions that run...

Credibility and transparency are at the core of the current debate about exchange rate regimes. The steady growth in the magnitude and variability of international capital flows has complicated the question of whether to use floating, fixed, or intermediate exchange rate regimes. Emerging market...

The author examines the effect of fiscal adjustment on the real exchange rate. The argument is made that the direction and extent of that effect depends on the way fiscal adjustment is carried out. If a fiscal deficit is reduced mainly by reducing total government spending, the effect on the...

This paper develops a two equation model for measuring how public sector deficits - and the way that they are financed - affect the real exchange rate, the trade balance, the current account and the level of external indebtedness. One equation relates the real exchange rate to the trade surplus...

In the past, the Thai government usually ran a budget deficit. In recent years, the deficit has become a surplus. A continued high growth rate in the last three years produced an unexpected rise in tax revenues, and the growth of public spending was effectively controlled. The government has...