The choice of assigning monetary or fiscal policy to external balance is complicated when the authorities are concerned with both the current account balance and the exchange rate. A strategy of using monetary policy to control the current account via the exchange rate may fail, because the...

Yugoslav inflation unfolded as a classic wage-price-exchange rate spiral through the 1970s and 1980s and exploded into hyperinflation in the last quarter of 1989. This paper examines the process of monetary accommodation of inflation, the behavior of demand for money, and the interaction between...

The paper argues that the endogenous behavior of monetary authorities provides an important channel through which fiscal policy influences financial variables, and that growing internationalization has increased the sensitivity of financial conditions to fiscal policy. The core of the argument...

This paper reviews the pros and cons of institutionalized constraints limiting the freedom of national budgetary policies within an Economic and Monetary Union (EMU) in Europe. The issue is approached from three angles: the influence of EMU on (i) budget discipline; (ii) intergenerational equity...

The introduction of a new currency has often occurred as part of a program to fight hyperinflation. In this context, non-uniform conversion rates for different types of assets and liabilities have been used as a means of reducing an initial “excess” stock of liquidity. The paper examines the...

This paper develops a structural macroeconometric model of the world economy, disaggregated into thirty five national economies. This panel unobserved components model features a monetary transmission mechanism, a fiscal transmission mechanism, and extensive macrofinancial linkages, both within...

The degree of an economy’s monetization, which has an important implication on economic growth, can be affected by the conduct of monetary policy, financial sector reform, and episodes of financial crises. The paper finds that monetization--measured by the ratio of broad money to nominal GDP--...

This paper evaluates monetary policy-tradeoffs in low-income countries using a dynamic stochastic general equilibrium (DSGE) model estimated on data for Mozambique taking into account the sources of major exogenous shocks, and level of financial development. To our knowledge this is a first...

Most WAEMU countries are likely to see economic growth deteriorate over the next two years as a result of the global economic crisis, and some WAEMU countries will be more severely affected by the crisis than others. This could have a detrimental effect on efforts to reduce poverty....

To mitigate the risks of contagion from problems arising in the banking sector, many countries operate some form of banking sector safety net. Such safety nets generally involve a judicious mixture of transparency and ambiguity. This ambiguity may be important to counter moral hazard effects but...