The paper sets out an overlapping generations model in an open economy context. In the absence of productive capital a real consol is the vehicle for intertemporal consumption smoothing. The presence of a long term asset implies that the anticipated future path of the economy, through the term...

The paper investigates the optimal tire path of consumption and external borrowing in the dependent economy model. The small country faces given world prices and a given world real interest rates. The presence of a home goods sector implies that the relevant real interest rate appropriate to...

This report presents two unrelated, short papers on exchange rate rules and on the real value of the external debt. The paper on exchange rate policy uses the Taylor model of overlapping, long term wage contracts to ask whether accommodating or PPP oriented exchange rate policies tend to...

The paper investigates the process of inflation stabilization under conditions of international capital mobility. A first part looks at the traditional view of inflation and payments problems as a reflection of fiscal problems and deficit finance. From there the analysis proceeds to the...

This paper discusses the link between portfolio diversification models of exchange risk and the macroeconomics of exchange rate determination. A first part sets out the mean-variance model of portfolio choice for the case of two nominal assets with random real returns. From there the model is...

This paper discusses exchange rate rules in their role as macroeconomic instruments. Two quite different approaches are pursued. The traditional view is that exchange rate flexibility is a substitute for money wage flexibility so that managed money and managed exchange rates yield the necessary...

This paper investigates the adjustment process to a reduction in the rate of credit creation in an open, flexible exchange rate economy. The framework of analysis is one of rational expectations with respect to interest rates, inflation and depreciation. The special feature of the model is the...

The continuing depreciation of the dollar stands out as one of the big policy issues. It has started to impinge on U.S. monetary policy; it influences the chances for international commercial diplomacy, and it is enhancing the move toward European monetary integration. Above all it leaves most...

The 1980s were a lost decade for Latin America, will the 1990s also be lost? For some countries stabilization has not even started. In other countries the stabilization accomplishments remain tentative and vulnerable. And even those countries that have established firmly a new path for their...

Do existing theories of stabilization help understand the credibility issues involved in such programs? The experience with stabilization in a hyperinflation setting in Israel and Latin America makes it worthwhile to ask how much existing theories help understand the success and failure of these...