The introduction of banks that issue movey and supply balances and pay out their profits as dividends is the natural modification of the model of general competitive equilibrium that encompasses monetary economies. Interest rates are suitable instruments for the control of expected inflation but...

I construct and analyse an example of an economy with production and money under conditions of uncertainty, assymetric information, and an incomplete asset market. For alternative scenarios, which differ in the information available to consumers and firms, I compute the equilibrium prices and...

The paper assesses whether the exchange rate is affected by monetary policy and whether these effects are permanent or transitory. The paper takes the position that the exchange rate regime determines the flexibility of monetary policy.

By employing the techniques of multivariate cointegration and error-correction models, we investigate the impact of the creation of the European Monetary System (EMS) on the exports of the four largest EU countries to each other. Our findings suggest that the impact of the EMS on bilateral...

This paper presents evidence that the existence of deposit and lending facilities combined with an averaging provision for the reserve requirement are powerful tools to stabilize the overnight rate.

In this paper I investigate the relevance of the exchange rate regime for macroeconomic stability. I simulate hypothetical macroeconomic developments under different regimes in Sweden during the period 1972 -1996. The main question is how stable output would have been if Sweden had had a...

This paper presents a benchmark model that rationalizes the choice of the degree of exchange rate flexibility. We show that the monetary authority may gain efficiency by reducing volatility of both the exchange rate and the interest rate at the same time. Furthermore, the model is consistent...