This article examines three competing hypotheses and their ability to explain events in international financial markets during the 1980s. The rival hypotheses view the trade deficit as caused alternatively by large U.S. budget deficits, by tight U.S. monetary policy, or by real shocks to...

Development of rational expectations models of the business cycle has been the central issue on the macroeconomic research agenda since the influential analyses of Robert Lucas. In this essay, we review these developments, focusing on the extent to which the rational expectations perspective has...

This paper presents an analysis of Japanese monetary policy, and concentrates on the operating mechanisms used by the Bank of Japan in conducting policy. References are made to U.S. monetary policy in an attempt to highlight the major similarities and differences between the respective monetary...

Returning to a topic first systematically treated by Poole (1970) in a textbook Keynesian model, this paper compares interest rate and money supply rules. Our analysis, by contrast, is conducted within a rational expectations macro model that incorporates flexible prices and informational...