The effects of inflation are worked out for a small open economy with Cash-in-Advance (CIA) constraints on bond purchases. If all transactions are subject to CIA constraints, an increase in the inflation rate will reduce savings, bringing about a current account deficit, while the capital stock...

In this paper we study the effects of monetary policies on employment, capital accumulation, consumption, and the term structure of interest rates in a cash-in-advance economy, where money is required for consumption expenditures. Monetary policy involves targeting the inflation rate. The...

This paper studies the effects of monetary policies on employment, capital accumulation, consumption, and the term structure of interestrates in a cash-in-advance economy, where money is required for consumption expenditures. Monetary policy involves targeting the inflation rate or the nominal...

It is shown that, in contrast to models with fixed labour, a change in monetary policy involving an increase in the inflation rate would have the same qualitative effects on steady state capital, consumption, and employment, regardless of whether only consumption or both consumption and...

The effects of exchange rate policies are examined for a small open economy in an infinite horizon model with investment, labor/leisure choice, and cash-in-advance for consumption. An increase in the rate of depreciation of the domestic currency reduces consumption and labor supply, as the...

The effects of trade liberalizations are studied for a small open economy in a model with durable goods. A trade liberalization increases the permanent income of the representative agent, because it removes trade distortions. The increase in permanent income leads to a corresponding increase in...

We consider inflation stabilisation policies for a small open economy with an endogenous time preference when consumption exhibits durability. The time preference effect and the durability effect have competing influences on the adjustment of consumption expenditures, which will likely exhibit...