This paper analyzes the dynamics of the real exchange rate and the price of equity for a small open economy using an optimizing model in which the process of capital accumulation entails adjustment costs. The analysis demonstrates that along an adjustment path toward long-run equilibrium,...

This paper considers whether the Phillips curve can explain the recent behavior of inflation in the United States. Standard formulations of the model predict that the ongoing large shortfall in economic activity relative to full employment should have led to deflation over the past several...

This paper considers whether the Phillips curve can explain the recent behavior of inflation in the United States. Standard formulations of the model predict that the ongoing large shortfall in economic activity relative to full employment should have led to deflation over the past several...