Long-run purchasing power is tested on 16 OECD countries using data from 1960 to 1994; PPP is rejected for some countries (Canada, Japan, Switzerland, Austria, Italy and Spain) and not rejected for others (Sweden, France, Holland and the United Kingdom). For the latter countries, impulse response...

Simple inflation targets may be supplemented with an escape clause to be evoked in case the economy is hit by a major supply shock. In this paper, consistent solutions to the Flood and Isard (1990) escape clause model are derived in the spirit of Lohmann (1990). She showed that Flood and Isard's...