In this paper, I consider modeling the effects of the macroeconomic determinants on the nominal exchange rate to be channeled through the transition probabilities in a Markovian process. The model posits that the deviation of the exchange rate from its fundamental value alters the market’s belief in the probability of the process staying in certain regime next period. This paper further takes i...

This paper develops a two-period disequilibrium model of a small open economy under Keynesian unemployment to analyse the effects of temporary, anticipated, and permanent coffee price shocks. The model includes a government sector that administers a commodity price stabilisation fund, and allows for capital market imperfections. The type of capital market imperfection makes an important differe...

Interest in nominal GDP (NGDP) targeting has come in the context of large advanced economies. Developing countries are better suited for it, however, in light of big supply shocks and terms of trade shocks, such as monsoon rains and oil import price shocks in the case of India. Under annual inflation targeting (IT), the full impact of adverse supply shocks is felt as lost real GDP. NGDP targeti...

The intertemporal current account approach predicts that the current account of a small open economy is independent of global shocks, and that responses of the current account to countryspecific shocks depend on the persistence of the shocks. The author shows that these predictions impose cross-equation restrictions (CERS) on a structural vector autoregression (SVAR). To test the CERs, the auth...

The devaluation of the Mexican peso of 1995 along with the more recent financial crises in emerging economies are viewed as systematic outcomes of the operation of free currency markets. The hypothesis is that there exists a distortion in free currency markets that makes developing countries systematically misallocate resources. The distortion lies in “asymmetric reputation” that leads to subst...

This paper examines the e↵ects of liquidity on the demand for imports of non-durable consumers’ goods in Trinidad and Tobago. A parsimonious vector equilibrium correction model (VEqCM) is used to test the hypotheses that liquidity has both longand short-run e↵ects. The multivariate cointegration approach of Johansen and Juselius (1990) is used to determine long-run relations and general to spec...

The trifluorovinyl radical (C2F3’) is identified by using infrared spectroscopy. Real-time broadband infrared laser and diode infrared laser absorption spectra of the trifluorovinyl radical were measured. The radical was generated from UV laser photolysis of trifluoroiodoethene (C2F,I) at 248 nm in the gas phase. The observed vibrational frequencies and intensities [u,, 1290 (f5) cm-I, 106 (f39...

Using a standard open economy DSGE model, it is shown that the timing of asset trade relative to policy decisions has a potentially important impact on the welfare evaluation of monetary policy at the individual country level. If asset trade in the initial period takes place before the announcement of policy, a national policymaker can choose a policy rule which reduces the work effort of house...

The observed excess price variability in cross-border city pairs compared to that in withincountry city pairs has been defined as the “border effect.” We used a unique data set from cities that were in the same country at one time and were in two separate countries later on to examine the effects of the presence of a national border on price variability. Interestingly a border-like effect was d...

This paper investigates the implications of external indebtedness and international …nancial integration on the e¤ects of foreign interest rate shocks in a small-open economy. The theoretical component of the analysis develops a business cycle model that can successfully match the impulse responses of the Turkish economy to U.S. interest rate shocks. It is found in the context of this model tha...