Are Expected Inflation Rates and Expected Real Rates Negatively Correlated? A Long‐Run Test of the Mundell‐Tobin Hypothesis

Some empirical evidence suggests that the expected real interest and expected inflation rates are negatively correlated. This hypothesis of negative correlation is sometimes known as the Mundell‐Tobin hypothesis. In this article we reinvestigate this negative relation from a long‐term point of view using cointegration analysis. The data on the historical interest rate on T‐bills and the inflation rate indicate that the Mundell‐Tobin hypothesis does not hold in the long run for the United States, the United Kingdom, and Canada. We also obtain similar results using the real interest rate on index‐linked gilt traded in the United Kingdom.     

Speculative attack against the Hungarian forint

In mid-January 2003 a severe speculative attack was launched against the exchange rate of the Hungarian forint. The attack was very unusual in the history of foreign exchange speculations, since it was aimed at enforcing the appreciation — and not the depreciation — of the currency targeted. The specific nature of this kind of speculation is closely related to Hungary’s accession to the European Union in general and to EMU in particular. Since the other Central and Eastern European acceding countries face similar problems and challenges, the Hungarian experience may involve some instructive lessons on monetary and economic policy for them too.     

Costs and benefits of EU enlargement

While the political benefits of the coming EU enlargement are relatively easy to identify, its economic and financial consequences are less unequivocal. The following article examines the likely costs and benefits of enlargement to both existing and future Members, and in particular how it will affect Germany, one of the few present EU Member States which has direct borders with acceding states. The article expresses the personal opinions of the author.     

The New Economy is dead,long live the information economy

The arrival of the 2001–2003 recession caused many to suppose that the so-called “New Economy” was now defunct. This article addresses a number of related issues, including the question of the durability and viability of business cycles in the face of the technological developments of the information age. It asks what went wrong with the New Economy and examines its characteristics as well as its remaining possibilities and prospects for the future. Finally, it considers the spread of the Information Economy to Europe, especially to Germany, the country that one might expect to be the leading European player, but which is not at present actually a strong competitor for that role.