The foreign exchange market is the largest, fastest-growing financial market in the world. Yet conventional macroeconomic approaches do not explain why people trade foreign exchange. At the same time, they fail to explain the short-run determinants of the exchange rate. These nine innovative...

This paper uses the Blanchard (1985) finite horizon model to study how taxes and government spending can be managed to stabilize aggregate demand. It is shown that tax policy cannot stabilize demand in less time than it stabilizes the public debt, but that, if government spending is the...