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This paper discusses the relationship between foreign currency deposits and money, and it shows that the indexation of part of the nominal money supply to the exchange rate, as a result of the presence of foreign currency deposits, will increase the inflationary effects of monetary disequilibria under a floating exchange rate system and will reduce the effect of a devaluation of a usually fixed exchange rate. When a real exchange rate rule is followed, the presence of foreign currency deposits implies that there is less of a tradeoff between the rate of nominal depreciation/inflation and the level of the real exchange rate. The paper shows how certain aspects of financial programming may be affected by the presence of these deposits.

Currencies --- Currency --- Deflation --- Demand for Money --- Demand for money --- Foreign Exchange --- Foreign exchange --- Government and the Monetary System --- Inflation --- Macroeconomics --- Monetary base --- Monetary economics --- Monetary Policy, Central Banking, and the Supply of Money and Credit: General --- Monetary Systems --- Money and Monetary Policy --- Money supply --- Money --- Open Economy Macroeconomics --- Payment Systems --- Price Level --- Prices --- Real exchange rates --- Regimes --- Standards --- Argentina

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This paper reviews recent developments in the theoretical and empirical analysis of balance-of-payments crises. A simple analytical model highlighting the process leading to such crises is first developed. The basic framework is then extended to deal with a variety of issues, such as: alternative post-collapse regimes, uncertainty, real sector effects, external borrowing and capital controls, imperfect asset substitutability, sticky prices, and endogenous policy switches. Empirical evidence on the collapse of exchange rate regimes is also examined, and the major implications of the analysis for macroeconomic policy discussed.

Foreign Exchange --- Money and Monetary Policy --- Monetary Systems --- Standards --- Regimes --- Government and the Monetary System --- Payment Systems --- Open Economy Macroeconomics --- Monetary Policy, Central Banking, and the Supply of Money and Credit: General --- Currency --- Foreign exchange --- Monetary economics --- Exchange rates --- Exchange rate arrangements --- Conventional peg --- Real exchange rates --- Domestic credit --- Money --- Credit --- Argentina

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This paper analyzes stabilization policy under predetermined exchange rates in a cash-in-advance, staggered-prices model. Under full credibility, a reduction in the rate of devaluation results in an immediate and permanent reduction in the inflation rate, with no effect on output or consumption. In contrast, a non-credible stabilization results in an initial expansion of output, followed by a later recession. The inflation rate of home goods remains above the rate of devaluation throughout the program, thus resulting in a sustained real exchange rate appreciation.

Banks and Banking --- Consumption --- Currency --- Deflation --- Economics --- Finance --- Financial services --- Foreign Exchange --- Foreign exchange --- Inflation --- Interest rates --- Interest Rates: Determination, Term Structure, and Effects --- Macroeconomics --- Macroeconomics: Consumption --- Monetary base --- Monetary economics --- Monetary Policy, Central Banking, and the Supply of Money and Credit: General --- Money and Monetary Policy --- Money supply --- Money --- National accounts --- Open Economy Macroeconomics --- Price Level --- Prices --- Real exchange rates --- Real interest rates --- Saving --- Wealth --- Argentina

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This paper examines the relationship between temporary terms of trade shocks and household saving in developing countries. It is first shown that, from a theoretical standpoint, this relationship is ambiguous: private saving may rise or fall in response to a transitory terms of trade shock, depending on the values of the intertemporal elasticity of substitution and the intratemporal elasticity of substitution between traded and nontraded goods. Empirical estimates of these two parameters are obtained using data from a sample of 13 developing countries, and then used to draw implications for the response of private saving to transitory terms of trade shocks.

Banks and Banking --- Exports and Imports --- Macroeconomics --- Macroeconomics: Consumption --- Saving --- Wealth --- Current Account Adjustment --- Short-term Capital Movements --- Open Economy Macroeconomics --- Empirical Studies of Trade --- Interest Rates: Determination, Term Structure, and Effects --- Trade: General --- International economics --- Finance --- Consumption --- Terms of trade --- Private savings --- Real interest rates --- Imports --- International trade --- National accounts --- Financial services --- Economics --- Economic policy --- nternational cooperation --- Saving and investment --- Interest rates --- Costa Rica --- Nternational cooperation

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This paper identifies obstacles hindering the transformation of centrally-planned economies (CPEs) into well-functioning market economies. The obstacles identified relate to (i) anticipatory dynamics, (ii) monetary overhang and the budget, and (iii) underdeveloped credit markets. It is demonstrated that these obstacles inhibit the effectiveness of price reform, monetary and credit policies, and trade liberalization. The analysis focuses on various ways to remove the obstacles. In this regard, a special examination is made of the implications of “cleaning” the balance sheets of enterprises and banks from nonperforming loans, as well as ways to enhance credibility. The paper concludes with a brief discussion of sequencing, “safety nets,” and their associated obstacles.

Budgeting --- Exports and Imports --- Finance: General --- Macroeconomics --- Money and Monetary Policy --- Trade Policy --- International Trade Organizations --- Current Account Adjustment --- Short-term Capital Movements --- International Lending and Debt Problems --- Open Economy Macroeconomics --- International Financial Markets --- General Financial Markets: General (includes Measurement and Data) --- Comparison of Public and Private Enterprises and Nonprofit Institutions --- Privatization --- Contracting Out --- Monetary Policy, Central Banking, and the Supply of Money and Credit: General --- National Budget --- Budget Systems --- Finance --- International economics --- Monetary economics --- Budgeting & financial management --- Capital markets --- Trade liberalization --- Credit --- Budget planning and preparation --- Financial markets --- International trade --- Economic sectors --- Money --- Public financial management (PFM) --- Capital market --- Commercial policy --- Budget --- Bulgaria