This paper considers how the structure of an open economy determines its flexibility in responding to external shocks. Inter- and intrasectoral reallocation of both expenditures and factors of production are shown to mitigate the consequences of a severe terms-of-trade shock. We demonstrate that...

The present value tests of intertemporal model of the current account usually assume that all goods are traded and that aggregate consumption decisions can be closely approximated by a random walk process. This paper extends these models by explicitly introducing durables and nontraded goods...

The paper investigates whether it is the level of inflation, changes in the inflation rate or unanticipated inflation which influence the variability of sectoral output growth rate, using the U.S. monthly industrial data from 1957 to 1997. We experiment a range of specifications - our main...

One of the costs of high levels of in ation may be misperceptions of relative prices and excessive volatility in sectoral output. This paper therefore examines the relationship between the level of inflation and sectoral output growth variability in Canada from 1961:1 to 1995:4. Despite the...

In recent years there has been a revival of interest in the trade-growth nexus. A number of authors have suggested that regional economic integration and liberalization of international trade are likely to have positive effects not only on productivity levels but also on long-term productivity...

The International Monetary Fund (IMF)-prescribed introduction of higher interest rates in crisis-hit economies has been criticized as being unnecessarily contractionary. This criticism ignores the effects of interest rate policy on the incentives to restructure corporate debt once it has become...