This paper incorporates a financial accelerator mechanism in a small open economy macro model with money and nominal price rigidities. Our goal is to explore the connection between financial distress that feeds into the real economy and the exchange rate regime. Our principle finding is that...

This Economic Letter summarizes the papers presented at the conference "Asset Prices, Exchange Rates, and Monetary Policy" held at Stanford University on March 2-3, 2001, under the joint sponsorship of the Federal Reserve Bank of San Francisco and the Stanford Institute for Economic Policy Research

I review the case for pegging the exchange rate by surveying the recent theoretical literature on the choice of exchange rate regimes. This literature suggests that by enhancing the transparency or controllability of monetary policy, pegging may be more effective in lowering inflation...