The effects of monetary disturbances differ across sectors when some prices can adjust more rapidly than others. In a model economy with two sectors possessing different speeds of price adjustment, monetary shocks generate inverse movements of real interest rates, alter relative prices, and...

Economists generally assert that countries sacrifice monetary independence when they peg their exchange rates. At the same time, central bankers frequently assert that pegging an exchange rate does not eliminate the independence of monetary policy. This paper examines the effects of money-supply...