This paper revisits the Kareken-Wallace model of exchange rate formation in a two-country overlapping generations world. Following the seminal paper by Arifovic (Journal of Political Economy, 104, 1996, 510-541) we investigate a dynamic version of the model in which agents' decision rules are...

This paper revisits the Kareken-Wallace model of exchange rate formation in a two-country overlapping generations world. Following the seminal paper by Arifovic (Journal of Political Economy, 104, 1996, 510 - 541) we investigate a dynamic version of the model in which agents' decision rules are...

This study examines causation between the current account and the fiscal surplus and fiscal spending for a commodity-based economy, Peru. Using quarterly data for the open economy, the outcomes reject the twin deficits hypothesis. Instead, the evidence points strongly to reverse causality, that...