We present the simulations of fiscal adjustment policies to the Maastricht criteria in the European economies based on a rational-expectations model of the G7 economies. We find that an effort to achieve the fiscal criteria inflicts pronounced recessions on the European economies. Furthermore,...

We address three related questions concerning financial liberalization in a small open economy. Does financial liberalization and the resulting capital inflow improve production efficiency in the domestic economy? Who benefits from financial liberalization in the long run and in the short run?...

We analyze the choice between fixed and flexible exchange rates in the context of an open economy version of a multimarkets equilibrium model. In contrast to previous analysis, we separate the information and the shock-absorbing aspects of the two regimes. Under a relative price risk criterion,...