Real aspects of exchange rate regime choice with collapsing fixed rates
AbstractTypical evaluations of the choice of exchange rate regime employ a criterion function that depends on the real performance of the economy, and they focus on regimes that are expected to last indefinitely. This latter feature is strongly contradicted by the transitory nature of actual regimes.This paper extends the recent literature on collapses of fixed exchange rate regimes with exogenous real sectors to examine how the predictions of two popular models for the determination of some real economic variables must be modified when agents rationally perceive that the fixed rate regime will be transitory. The models studied are simple stochastic versions of the models in Dornbusch (1976) and Flood and Marion (1982).
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of International Economics.
Volume (Year): 21 (1986)
Issue (Month): 3-4 (November)
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Web page: http://www.elsevier.com/locate/inca/505552
Other versions of this item:
- Robert P. Flood & Robert J. Hodrick, 1985. "Real Aspects of Exchange Rate Regime Choice with Collapsing Fixed Rates," NBER Working Papers 1603, National Bureau of Economic Research, Inc.
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