We extend the "fundamentals model" of currency crisis by incorporating the currency substitution effects explicitly. In a regime of free foreign exchange markets and free capital movements the reserve (hard) currencies are likely to substitute for the local soft currency in agents' portfolia...

This paper asseses of the role of economic growth in achieving the first target of the Millennium Development Goals (MDGs). The analysis is composed of two parts. First, we address economic growth as the most effective instrument for achieving poverty reduction. In evaluating feasibility we...

In a regime of free foreign exchange markets and free capital movements the reserve (hard) currencies are likely to substitute for the local soft currency in agents’ portfolia that include currency as an asset. This argument implies a process of cumulative circular causation with currency...

We formulate and implement a new empirical procedure to examine the validity of PPP in the long-run for 153 countries by using the familiar cross-country data set of Heston, Summers, and Aten (2002). Unlike the existing studies that rely on mean reversion of real exchange rates, we explicitly...