We compare international monetary arrangements that differ in the degree of both policy activism and exchange rate flexibility in a model with policy credibility, nominal wage rigidities and unobservable shocks. Three results stand out. First, the selection of the exchange rate regime is less...

In most instances, the dynamic response of monetary and other policies to shocks is infrequent and lumpy. The same holds for the microeconomic response of some of the most important economic variables, such as investment, labor demand, and prices. We show that the standard practice of estimating...

Developments in the knowledge and communication technologies have been causing significant changes on the working mechanisms of the economy both at the national and international areas. Some of the developments can be indicated as follows: the dramatic increasing of capital movements amongst...

Using Minsky (1986), this paper attempts to answer two questions: (1) How does policy affect real and nominal variables? and (2) How should monetary policy be conducted so as to improve the performance of the economy? Minsky asserted that rising interest rates, brought about by contractionary...