This paper investigates both the effects of domestic monetary policy and external shocks on fundamental macroeconomic variables in six fast growing emerging economies: Brazil, Russia, India, China, South Africa and Turkey - denoted hereafter as BRICS_T. The authors adopt a structural VAR model...

This paper evaluates welfare under optimal monetary and fiscal policy in a dynamic stochastic model of currency substitution and capital. It shows that in a partially dollarized economy, the main optimal policy results, i.e. the Friedman Rule and the zero capital tax, hold. Welfare implications...

Within this paper we specify a symmetric two country model for the euro area to evaluate monetary and fiscal policy interaction with decentralized fiscal authorities. Obviously this calls for rules which neatly balance the chances and perils. Thereby we show that stringent rules are a...

Fiscal deficits, elevated debt-to-GDP ratios, and high inflation rates suggest hyperinflation could have potentially emerged in many European countries after World War I. We demonstrate that economic policy uncertainty was instrumental in pushing a subset of European countries into...

China’s policy responses to the 2008 financial crisis and its economic performance afterwards have received wide attention from researchers and policy makers throughout the world, particularly in the United States. The purpose of this paper is to examine the context in which China’s policy...

The main contributions of this paper are to introduce growth into a crisis framework and to derive the contingency plans for consumption and investment in a manner consistent with the stochastic nature of the state of the economy. The conclusion is that expected deviations from trend in the...

In this paper we examine the main challenges in promoting an effective market economy. While the paper ranges widely across the spectrum of economic institutions and policies, the central theme is the importance of macroeconomic stability for economic growth in the medium and long run....

In this paper, I show that sign and magnitude of the contemporaneous exchange rates-interest rate (ER-IR) correlation are predictable, across countries and through the risk cycle. I discuss the correlation smile, whereby the ER-IR correlation for countries at both extremes of the risk spectrum...

In this paper, we argue that the effect of monetary and fiscal policies on the exchange rate depends on the fiscal regime. A contractionary monetary (expansionary fiscal) shock can lead to a depreciation, rather than an appreciation, of the domestic currency if debt is not backed by future...