We examine the factors that account for the returns on currency carry trade strategies. Using a dataset of daily returns spanning 18 years for 5 different long - short currency carry portfolios, we first document a robust empirical relationship between carry trade excess returns and exchange...

<DIV><DIV><DIV><P>The distinguished International Seminar on Macroeconomics (ISoM) has met annually in Europe for thirty years. The papers in <I>ISoM 2007 </I>discuss interest setting and central bank transparency; expectations, monetary policy, and traded goods prices; public investment and the golden rule; the role of...</i></p></div></div></div>

<DIV><P>The current account deficit of the United States is more than six percent of its gross domestic product—an all-time high. And the rest of the world, including other G7 countries such as Japan and Germany, must collectively run current account surpluses to finance this deficit. How long can...</p></div>

This paper reviews and interprets some of the key policy implications that flow from a class of DSGE models for optimal monetary policy in the open economy. The framework suggests that good macroeconomic outcomes in open economies are possible by focusing inflation targeting that is implemented...