Real effects of collapsing exchange rate regimes: an application to Mexico
AbstractThis paper examines the impact of a collapsing exchange rate regime on output in an open economy in which shocks to capital flows and exports predominate. A sticky-price rational expec-tations model is used to compare the variability of output under the collapsing regime to that under alternative fixed and flexible regimes. Output is found to be most stable under a flexible rate. A counterfactual exercise is performed for Mexico, using the parallel market exchange rate as a proxy for the shadow flexible rate. The main finding is that had Mexico been on a flexible rate for the past two decades, instead of a series of collapsing regimes, the variance of real output would have been reduced by half.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of International Economics.
Volume (Year): 57 (2002)
Issue (Month): 2 (August)
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Web page: http://www.elsevier.com/locate/inca/505552
Other versions of this item:
- Patrick N. Osakwe & Lawrence L. Schembri, 1999. "Real Effects of Collapsing Exchange Rate Regimes: An Application to Mexico," Carleton Economic Papers 99-07, Carleton University, Department of Economics, revised Aug 2002.
- Osakwe, Patrick & Schembri, Lawrence, 1999. "Real Effects of Collapsing Exchange Rate Regimes: An Application to Mexico," Working Papers 99-10, Bank of Canada.
- F40 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - General
- F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
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