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The paper presents evidence supporting the existence of a stable money demand relationship for Germany plus a core group of countries—France, Belgium, Denmark, Luxembourg and the Netherlands—that have not realigned their parities against the deutschmark since at least 1987. The predictive power of the core ERM aggregate for French and German inflation is also examined; it is shown that the ERM aggregate is a better predictor of German inflation than the German monetary aggregate alone. Thus, the ERM money supply is a useful indicator for German monetary policy, even if the latter only focuses on achieving domestic inflation targets.

Russia and many other transition countries are now facing the challenges of opening up, restructuring, and modernizing their economies, which requires addressing numerous institutional weaknesses and supply-side distortions. From a regional perspective, drawing on the experience of other reforming countries, the papers examine these issues. Aspects addressed include the implications of trade and capital flows, the process of labor market reform, financial market development, productivitiy growth, and innovation dynamics. The dynamics of the reform process are also studied in the context of new political economy models. Contents: Lane, T., Oding, N., Welfens, P.: Introduction.- Lane, T., Lipschitz, L., Mourmouras, A.: Capital Flows to Transition Economies: Reasons, Risks, and Policy Responses.- Gavrilenkov, E.: Long Term Structural Change and Productivity Growth in Russia.- Jungmittag, A., Welfens, P.: Innovation, Growth and Wage Structure in Transforming Economies.- Wiegert, R.: Financial Sector and Human Capital in a Long-Term Growth Perspective: The Case of Russia.- Faber, C., Strohe, H.: Structure and Growth of Private Consumption in Russia and East Germany.- Oding, N.: Labor Market Transformation and Hidden Unemployment in Russia.- Addison, J.: Principles of Market-Oriented Labor Market Policies.- Zaostrovtsev, A.: Rent-Seeking and Rent-Setting: Government Versus Competition (The Case of St. Petersburg).- Bohn, F.: Powerful Groups and Corruption.- Grinberg, R., Vardomsky, L.: Regional Dimension of the Market Transformation in Russia.- Nosova, O.: Foreign Trade Policies in Transformational Russian and Ukrainian Economies.- Doehrn, R., v. Westernhagen, N.: The Role of Foreign Direct Investment in Transformation.

This paper reviews the design of and experience with IMF-supported programs formulated in response to capital account crises in the 1990s, focusing on the experiences of eight countries: Turkey (1994), Mexico (1995), Argentina (1995), Thailand (1997), Indonesia (1997), Korea (1997), the Philippines (1997), and Brazil (1998). The capital account crises in emerging markets confronted both the affected countries and the IMF with a new set of challenges. The central feature of all these crises was the rapid reversal of capital inflows, bringing about a large and abrupt current account adjustment with pervasive macroeconomic consequences. The crises were characterized by an over-adjustment of external current accounts in relation to what was needed for any reasonable means of sustainability. This over-adjustment was associated with severe macroeconomic disruptions. Beyond the importance of crisis prevention, the experience of these countries suggests a number of lessons for program design in the context of high capital mobility-such as the appropriate roles for monetary, fiscal, and structural policies