The paper analyzes the impact of a stabilization policy based on a temporary reduction in the rate of devaluation. Against a background in which a constant rate of devaluation has no real effects, it is shown that the temporary policy does and, furthermore, that the real effects tend to become bigger (in absolute value) as the horizon of the temporary policy is shortened. The central discussion is carried out in terms of a one-good, cash-in-advance model, with perfect capital mobility and Ramsey-type consumers. Results are extended to account for home goods and variable velocity; the roles of capital mobility and banking liberalization are briefly discussed.

This paper investigates the possibility that the observed deviations of major bilateral exchange rates from values implied by market fundamentals are a consequence of rational asset market bubbles. When a new econometric methodology for detecting asset market bubbles is used, the joint hypothesis of no bubbles and stable autoregressive processes for relative money supplies and real incomes is rejected for the dollar/deutsche mark and dollar/pound ratesusing monthly data over the period 1973-82. Additional tests for coefficient stability and for lack of cointegration between exchange rates and market fundamentals suggest that the bubble findings must be interpreted with care.

This paper examines a new possible explanation for the recent rejections of the life cycle-permanent income model of consumption: the treatment of seasonal fluctuations. The paper shows that when the seasonal fluctuations in consumption purchases are included in an analysis of the life cycle-permanent income model, there is no evidence in the aggregate data against the model. The estimates of the parameters of agents' utility functions obtained with seasonally unadjusted data are plausible, and the unadjusted data do not reject the overidentifying restrictions on the model.

This paper examines a new possible explanation for the recent rejections of the life cycle-permanent income model of consumption: the treatment of seasonal fluctuations. The paper shows that when the seasonal fluctuations in consumption purchases are included in an analysis of the life cycle-permanent income model, there is no evidence in the aggregate data against the model. The estimates of the parameters of agents' utility functions obtained with seasonally unadjusted data are plausible, and the unadjusted data do not reject the overidentifying restrictions on the model.

It is widely believed that one of the Federal Reserve's first important monetary policy achievements was the deseasonalization of interest rates. The Federal Reserve supposedly accomplished this by introducing appropriate seasonal movements into the supplies of currency and high-powered money. This view implicitly assumes that there was no interaction between American and foreign financial markets. Two findings are reported that challenge this conventional view. First, interest rate seasonals disappeared in the United States and other countries at approximately the same time. Second, interest rate seasonal ended approximately 3 years before the seasonal movements of currency and high-powered money changed.

The paper analyzes the impact of a stabilization policy based on a temporary reduction in the rate of devaluation. Against a background in which a constant rate of devaluation has no real effects, it is shown that the temporary policy does and, furthermore, that the real effects tend to become bigger (in absolute value) as the horizon of the temporary policy is shortened. The central discussion is carried out in terms of a one-good, cash-in-advance model, with perfect capital mobility and Ramsey-type consumers. Results are extended to account for home goods and variable velocity; the roles of capital mobility and banking liberalization are briefly discussed.

This paper investigates the possibility that the observed deviations of major bilateral exchange rates from values implied by market fundamentals are a consequence of rational asset market bubbles. When a new econometric methodology for detecting asset market bubbles is used, the joint hypothesis of no bubbles and stable autoregressive processes for relative money supplies and real incomes is rejected for the dollar/deutsche mark and dollar/pound ratesusing monthly data over the period 1973-82. Additional tests for coefficient stability and for lack of cointegration between exchange rates and market fundamentals suggest that the bubble findings must be interpreted with care.

It is widely believed that one of the Federal Reserve's first important monetary policy achievements was the deseasonalization of interest rates. The Federal Reserve supposedly accomplished this by introducing appropriate seasonal movements into the supplies of currency and high-powered money. This view implicitly assumes that there was no interaction between American and foreign financial markets. Two findings are reported that challenge this conventional view. First, interest rate seasonals disappeared in the United States and other countries at approximately the same time. Second, interest rate seasonal ended approximately 3 years before the seasonal movements of currency and high-powered money changed.

This paper uses a two-country general equilibrium model of the world economy in order to analyze the effects of budget deficits and government spending on world rates of interest, consumption, and international indebtedness. It demonstrates the difference between the effects of fiscal expenditures and tax cuts as well as between the effects of current policies and expected future policies. It is shown that the qualitative effects of fiscal policies depend on whether the country introducing the policies runs a surplus or a deficit in its current account. Following the positive analysis of the short-run and the steady-state effects, the paper concludes with a normative analysis of the welfare implications of budget deficits.

This paper uses a two-country general equilibrium model of the world economy in order to analyze the effects of budget deficits and government spending on world rates of interest, consumption, and international indebtedness. It demonstrates the difference between the effects of fiscal expenditures and tax cuts as well as between the effects of current policies and expected future policies. It is shown that the qualitative effects of fiscal policies depend on whether the country introducing the policies runs a surplus or a deficit in its current account. Following the positive analysis of the short-run and the steady-state effects, the paper concludes with a normative analysis of the welfare implications of budget deficits.