This paper analyses optimal monetary policy in a small open economy allowing for financial dollarization (FD). More importantly, we endogenise FD, making it dependent on the expected monetary policy. Contrary to the standard small open economy model, where central banks should control domestic (producer) prices and adopt a pure floating exchange rate regime, we find that some exchange rate cont...

This paper examines the effects of inflation and currency substitution volatility on the average rates of inflation and currency substitution for twelve emerging market economies. Using a bivariate GARCH-in-Mean model, which accommodates for asymmetric and spillover effects of inflation and currency substitution innovations on their volatilities, we find that for the majority of the countries i...

This article evaluates Cuban economic performance in 2004–2005, contrasting it with 2003 and 1989 (prior to the crisis); in addition, it compares 2004 targets with actual performance and examines targets and prospects for 2005. The analysis of economic performance includes macroeconomic, physical output and external sector indicators; social performance is the subject of another paper in this v...

Understanding differences in business cycle phenomena between Emerging Market Economies (EMEs) and industrialized countries has been at the center of recent research on macroeconomic fluctuations. We investigate whether these are linked to credit market imperfections. To this end, we develop a small open economy Dynamic Stochastic General Equilibrium (DSGE) framework featuring both permanent tr...