In recent years a growing consensus has emerged for price stability as the overriding, long-run goal of monetary policy. However, despite this consensus, the following question still remains: how should monetary policy be conducted to achieve the price stability goal? This paper examines the...

This pape shows how a well known class of rational expectations hypotheses using linear vector autoregressions (VARs) can be extended to allow for unobservable Markov switching. The regime shift model used falls into the general framework of Hamilton (1990), but differs to the centered model...

In a broad psychological perspective, both economic incentives and social norms may be be regarded as giving rise to purposesful, or "rational" behavior. By this I simply mean that individuals act in accordaance with expected reward or punishment, even though the form these take differs...

Government budget balance forces the endogenous use of distortionary tax instruments when an exogenous reform is implemented. The aggregate efficiency of such reforms is based on comparisons of simple summary measures of the Marginal Cost of Funds of the various tariff or quota changes with the...