Since the mid 1980s, an extensive empirical literature has examined the relationship between U.S. fiscal deficits, exchange rates, and trade balances. The authors investigate two questions that continue to spark debate: do increased government deficits cause dollar appreciation, and do fiscal...

Federal-funds rate-forecast errors from vector autoregressive (VAR) models used for monetary policy analysis and fitted by ordinary least squares (OLS) are large relative to those from the futures market. Using three different structural VAR models, we show that forecasts based on a shrinkage...

The paper describes a relative entropy procedure for imposing restrictions on simulated forecast distributions from a variety of models. Starting from an empirical forecast distribution for some variables of interest, the technique generates a new empirical distribution that satisfies a set of...