Empirical Essays in Open Economy Macroeconomics

This book is comprised of two parts. The first uses data on Canada to determine the role asset price changes should play in the conduct of monetary policy within the inflation targeting and money growth targeting frameworks. The findings indicate that irrespective of the targeting framework, the policy rule that incorporates a response to asset price changes controls inflation better. Contrary to the conventional view, simulation experiments indicate that the money growth targeting policy rule is more efficient in controlling inflation than the inflation targeting policy rule. The second part presents theoretical and econometric analysis of the determinants of current account balances for Ghana. The results point to changes in world real interest rate, exchange rate, and the terms of trade as important determinants of current account. A policy regime analysis shows that the recent implementation of capital liberalization policies in Ghana has enabled Ghanaians to use the international financial market to smooth consumption. The analysis should be useful to graduate students in business schools and economic departments, and any person who is interested in international macroeconomic issues.