In an open economy, the scope for activist stabilization policy depends on the nature of the lincages between domestic and international markets for goods and assets. Tgoimportant relationships--purchasing power parity and uncovered interest-rate parity--have received extensive empirical...

This paper introduces a limited-information two-step estimator for models with rational expectations and serially correlated disturbances. The estimator greatly extends the area of applicability of McCallum's (1976) instrumental variables approach to rational expectations models. Section I...