Terence C. Mills and Geoffrey E. Woods examine what makes pegged exchange rates so attractive and consider the relationship between the exchange rate regime and a number of key macroeconomic variables, such as output, prices and interest rates, to see whether any systematic relationship exists between the behavior of these variables and the exchange rate regime.
Central bank independence is becoming popular, as evidenced by the number of countries that have recently enacted legislation removing their central banks from government control. Examining the economic rationale for this popularity, Patricia S. Pollard employs empirical studies to reveal that countries with independent central banks tend to experience low inflation with no loss of economic growth.
As a principle, it has long been asserted that the quantity of goods one can buy with a given currency, such as the dollar, should be equal across countries, at least in long-run equilibrium. This condition, known as long-run purchasing power parity (PPP), has been subjected to numerous empirical tests.
During the past two years, lower interest rates have stimulated extensive refunding of long-term debt, sharply increasing the relative volume of financial transactions. Mortgage refinancing has been a highly visible part of those transactions. Richard G. Anderson examines the effect of recent waves of mortgage refinancing on the demand for liquid deposits and growth of the monetary aggregates.
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