This paper analyzes institutional arrangements for exchange rate systems and reviews what we know. It looks at the foreign exchange market, different balance of payment situations in which countries find themselves and the necessary exchange rate adjustments. It studies the options that are...

This is a response to a critique by Paul Davidson of our 2013 book Keynes: Useful Economics for the World Economy and related work, where we describe, amongst other things, how the Swan diagram can be used to show how economies can use policy tools to achieve internal and external balance. In...

This paper provides critical comments on the Peter Temin - David Vines promotion of the basic Swan Diagram as (1) a policy tool to encourage any individual debtor nation experiencing balance of payment deficits to reduce its exchange rate in order to expand exports and reduce imports and (2) the...

After decades using monetary aggregates as the main instrument of monetary policy and having different varieties of crawling peg exchange rate regimes, Colombia adopted a full-fledged inflation-targeting (IT) regime in 1999, with inflation as the nominal anchor, a floating exchange rate, and the...

After decades using monetary aggregates as the main instrument of monetary policy and having different varieties of crawling peg exchange rate regimes, Colombia adopted a full-fledged inflation-targeting (IT) regime in 1999, with inflation as the nominal anchor, a floating exchange rate, and the...

How can a currency union be sustained when member states have an exit option? This paper derives how fiscal and monetary policies can ensure the survival of a common currency, if countries want to leave the union. A union-wide central bank can prevent a break-up by setting interest rates in...

How can a currency union be sustained when member states have an exit option? This paper derives how fiscal and monetary policies can ensure the survival of a common currency, if countries want to leave the union. A union-wide central bank can prevent a break-up by setting interest rates in...

We propose a model of endogenous, persistent coordination on the international medium of exchange. An asset becomes the dominant international medium because it is widely held, and remains widely held because it is dominant. The country issuing the dominant asset is a net debtor, but earns an...

Monetary policy instruments differ in tightness-how closely they are linked to inflation-and transparency-how easily they can be monitored. Tightness is always desirable in a monetary policy instrument; when is transparency? When a government cannot commit to follow a given policy. We apply this...

We introduce "financial imperfections" -- asymmetric net wealth positions, incomplete risk-sharing, and interest rate spreads across member countries -- in a prototypical two-country currency union model and study implications for monetary policy transmission mechanism and optimal policy. In...