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In contrast to advanced markets (AMs), procyclical monetary policy has been a problem for emerging markets (EMs), with macroeconomic policies amplifying economic upswings and deepening downturns. The stark difference in policy has not been subject to extensive study and this paper attempts to address the gap. Key findings, using a large sample of EMs over the past 50 years, are: (i) EMs have adopted increasingly countercyclical monetary policy over time, although large differences remain among EMs and policies became more procyclical during the recent crisis. (ii) Inflation targeting and better institutions have been key factors behind the move to countercyclicality. (iii) Only deep financial markets allow EMs with flexible exchange rate regimes turn countercyclical. (iv) More countercyclical policy is associated with far less volatile output. The economically meaningful impact of IT on monetary policy countercyclicality and output variability is another reason in its favor, over and above better inflation outcomes.

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As a further contribution to the growing international literature on exchange rate pass-through (PT), this study assesses the extent of PT for Irish import prices over the period 1963 to 1995. It fills two important gaps in the literature, by making due allowance for the time series properties of the data and by concentrating on the case of a small open economy. In order to assess the extent of PT a mark-up model for aggregate import unit values is employed. It is argued that the usual single equation mark-up estimation technique leads to seriously biased and inefficient estimates of the degree of PT, as it ignores the strong simultaneity of import prices and domestic competing prices. This study makes use of the Johansen technique to allow for such simultaneity and uncovers two long-run equilibrium relationships among the data, for import unit values and domestic competing prices, and confirms the existence of very close to full PT for both. Previous results in the literature demonstrating substantially less than full PT may be due to the failure to make proper allowance for the time series properties of the data or for the strong simultaneity which exists between import and domestic competing prices.

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This paper addresses the unresolved issues surrounding the determination of Irish in£ation. The study tests the validity of (i) a pure wage mark-up model, (ii) a pure small open economy model and (iii) a hybrid model which fuses elements of (i) and (ii) over the period 1979Q1^1995Q3. Multivariate cointegration techniques are employed to clearly distinguish the long-run and short-run information in the data. The results highlight the relevance of the distinction between traded and non-traded prices. For traded prices, full purchasing power parity (PPP) was found to be consistent with the data. In the case of non-traded prices, the data reject strict long-run PPP. Aggregate price results occupy an intermediate position. Finally, we demonstrate that strong bi-directional feedback exists between prices and wages. " IntroductionIn this paper we attempt to shed light on some of the main unresolved issues surrounding the determinants of Irish in£ation. Central to the empirical approach adopted here is the construction of a new data set which permits separate analysis of the price determination processes in the traded and non-traded sectors of the economy. This approach is particularly associated with the Scandinavian model of in£ation. The econometric methodology is largely data-based and can be viewed as testing the long-run validity of (i) a wage mark-up model, (ii) a pure pricetaking small open economy (SOE) model and (iii) a hybrid model which fuses elements of (i) and (ii). Multivariate cointegration techniques are employed in order to clearly distinguish the long-run and short-run information in the data. Overall, the results underline the appropriateness

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