Under what circumstances can market forces prevent unsustainable borrowing? Effective market discipline requires that capital markets be open, that; information on the borrower’s existing liabilities be readily available, that no bailout be anticipated, and that the borrower respond to market...

Is there a stable aggregate money demand relationship for Europe? If so, why, and if not, why not? These questions are important for the implementation of policy by a European central bank, as well as for the appropriate speed of transition to EMU. This paper addresses them in a multi-country...

This paper takes as its starting point the recent empirical literature on exchange rate determination. Not only have monetary models failed to explain short-run exchange-rate movements, but there is evidence of non-stationary drift of exchange rates in relation to the course predicted by the...