Inflation and the terms of trade in a foreign exchange constrained economyFootnote∗

Our thanks to Graeme Wells for many hours of discussion on the subject matter and earlier drafts of this paper, to Bryan Philpott and Adolf Stroombergen for clarifying aspects of the PEP models, and to the Economic Monitoring Group of the New Zealand Planning Council for the stimulating seminar on New Zealand economy‐wide modelling held in December 1984 which prompted section II of this paper.

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