High interest rates to defend the exchange rate signal that a government is committed to fixed exchange rates, but may also signal weak fundamentals. We test the effectiveness of the interest rate defense by disaggregating into the effects on future interest rates differentials, expectations of...

High interest rates to defend the exchange rate signal that a government is committed to fixed exchange rates, but may also signal weak fundamentals. We test the effectiveness of the interest rate defense by disaggregating into the effects on future interest rates differentials, expectations of...

With annual data, real M2 is shown to have a surprisingly strong contemporaneous and leading relationship to GDP, robust to the inclusion of other explanatory variables. When combined and tested with parsimonious error correction equations for money demand, price determination, and a monetary...