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Working Paper
Macroeconomic fluctuations in Europe: demand or supply, permanent or temporary?
We use generalized method of moments to estimate a rational expectations aggregate demand-aggregate supply macroeconomic model for five European economies. Our aim is to examine whether supply or demand shocks have predominated in the major European economies during the post-war era and whether shocks of either type have been primarily temporary or permanent in nature. The estimation procedure is an alternative to estimating and interpreting vector autoregressions under restrictions either of the Bernanke-Sims variety or the Blanchard-Quah variety or to performing calibration exercises. ; We ...
Journal Article
Decision time for European Monetary Union
If the plans of European governments for economic and monetary union by the end of the decade are realized, a new common currency called the euro will be in use in at least a few western European countries within five years. Even earlier, starting in 1999, a new European Central Bank is slated to take control of monetary policy in the initial member countries. ; This article examines the economic and political factors that will determine whether monetary union proceeds on schedule and, if so, which countries are likely to be initial members. There is little chance that most of the countries ...
Working Paper
Nominal exchange rates and unit roots: a reconsideration
Journal Article
NAFTA promises overall U.S. gains in trading with Mexico
Journal Article
Monetary union in Europe
Journal Article
The role of external shocks in the Asian financial crisis
Within a few months in late 1997, a number of East Asian countries were hit by financial and exchange rate crises. Much analysis of this episode has emphasized either internal financial weaknesses or a process of contagion that converted a financial problem in one country into a regionwide crisis. The author of this article explores an alternative possibility: that some external shock common to all these countries triggered the crisis. The Chinese devaluation of 1994 and the prolonged Japanese recession are sometimes cited as factors, but the article concludes that they were probably only ...
Journal Article
The Mexican peso crisis
Hoping to avoid an economic slowdown during 1994, Mexico tried to maintain its quasi-pegged exchange rate while limiting monetary tightening by engaging in massive sterilized intervention-a policy that is not sustainable for long. The ultimate result was a collapse of the exchange rate, soaring interest rates, and probably a far worse recession than would have occurred if monetary policy had been tightened. ; The author of this article asks whether Mexican policy mistakes made devaluation of the peso inevitable, considering particularly Mexico's policy actions during 1994-as well as options ...
Working Paper
European Monetary Union: evidence from structural VARs
This paper examines the historical pattern of aggregate demand and supply shocks in several European Monetary System countries in order to assess the desirability of monetary union. Countries with similar patterns of shocks are presumably better candidates for monetary union than those hit by wildly disparate shocks. The historical time series of shocks is identified by estimating a vector autoregressive model while imposing the restriction that demand shocks have no permanent effect on real output. In most cases supply shocks are positively correlated with those of Germany, but the negative ...
Journal Article
The dollar and prices: an empirical analysis
Journal Article
Flexible exchange rates: an idea whose time has passed?