This paper explores the role of exchange rates in emerging economies with inflation-targeting regimes, an issue that has become especially germane during the current episode of financial turmoil and volatile capital flows. Under inflation targeting, the interest rate is the main monetary policy...

This paper discusses the case for a money pillar in the European Central Bank's (ECB) monetary policy strategy. Time-series evidence for industrial countries based on frequency-domain and unobserved-components analysis suggests that money can play a useful role in gauging and constraining...

Dynamic factor models and dynamic stochastic general equilibrium (DSGE) models are widely used for empirical research in macroeconomics. The empirical factor literature argues that the co-movement of large panels of macroeconomic and financial data can be captured by relatively few common...

This paper examines Turkey’s 2004 Article IV Consultation and Eighth Review Under the Stand-By Arrangement and Request for Waiver of Nonobservance of Performance Criterion. Economic performance over the last three years has been impressive. For the medium term, the main challenge is to...

This Selected Issues paper analyzes recent developments in the financial system of the Democratic Republic of the Congo (DRC). It describes the monetary developments in 2003–05 and reform of the financial system. The paper examines the impact of monetary and exchange rate policies on...

This paper evaluates the proposal that government authorities ought to target nominal income. It begins by viewing the literature in some detail. It then undertakes a theoretical analysis of the proposal first for the small country and next for the large country. There is then a general...

Exchange rate-based inflation stabilization (ERBS) policies are associated with a boom-recession cycle in economic activity and sustained real exchange rate appreciation. A class of models in the literature has explained these empirical regularities with the lack of credibility of the...

Zimbabwe has currently the highest rate of inflation in the world (an annual rate of 1,730 percent in February, 2007). The high rates of inflation have contributed to the contraction of the economy, which has declined by about 30 percent since 1999. This paper examines the stabilization...

This paper examines the issue of whether countries can improve their welfare by coordinating macroeconomic policies. The main purpose is to compute the gains from international monetary cooperation as the difference between the steady state consumption levels associated with the Nash and the...

This article uses two analytical methodologies to understand the dynamics of inflation in Paraguay, the mark-up theory of inflation and the monetary theory of inflation. We also study the impact of different monetary aggregates. The results suggest that monetary factors, in particular currency...