The political economy of the Exchange Rate Mechanism
AbstractThe apparent tendency of ERM countries other than Germany to experience high real exchange rates and to subsidize manufacturing is explained by a rational expectations model in which there is optimally asymmetric policy reaction to good and bad timesâ€”devaluation in bad, no revaluation in good. The resulting expected depreciation (at all times) causes inflation in normal and good times to be less than expected inflation, raising real wages and the real exchange rate, and creating pressures for subsidy of the traded sector. Copyright Kluwer Academic Publishers 1994
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Bibliographic InfoArticle provided by Springer in its journal Open Economies Review.
Volume (Year): 5 (1994)
Issue (Month): 3 (July)
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Web page: http://www.springerlink.com/link.asp?id=100323
traded goods; devaluation; subsidies; unanticipated inflation; political equilibrium;
Other versions of this item:
- Minford, Patrick, 1993. "The Political Economy of the Exchange Rate Mechanism," CEPR Discussion Papers 774, C.E.P.R. Discussion Papers.
- E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
- F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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- Linjouom, Mireille, 2004. "The Costs and Benefits Analysis of CFA Membership: The Choice of an Exchange Rate Regime for the CFA Countries Zone," Working Paper Series UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
- Pierre Siklos & Rod Tarajos, 1996. "Fundamentals and devaluation expectations in target zones: Some new evidence from the ERM," Open Economies Review, Springer, vol. 7(1), pages 35-59, January.
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