Sticky Prices and Alternative Monetary Feedback Rules: How Robust is the Overshooting Phenomenon?
AbstractThe present paper incorporates a mechanism of rules-based central-bank interventions into a Dornbusch-type framework. We show that the implied reactions of exchange rates and interest and interest rate differentials in response to a monetary shock depend crucially on the particular monetary policy feedback rule. The Dornbusch case of postively correlated and overshooting nominal and real exchange rates as well as nominal and real interest rate differentials is only one of the possible scenarios of our model. Different scenarios imply zero and negative correlations and even multiple overshooting. [E58, F31, F41]
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by Taylor & Francis Journals in its journal International Economic Journal.
Volume (Year): 13 (1999)
Issue (Month): 3 ()
Contact details of provider:
Web page: http://www.tandfonline.com/RIEJ20
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.:
- Obstfeld, Maurice & Rogoff, Kenneth, 1995.
"Exchange Rate Dynamics Redux,"
Journal of Political Economy,
University of Chicago Press, vol. 103(3), pages 624-60, June.
- Obstfeld, Maurice & Rogoff, Kenneth, 1995. "Exchange Rate Dynamics Redux," CEPR Discussion Papers 1131, C.E.P.R. Discussion Papers.
- Maurice Obstfeld & Kenneth Rogoff, 1996. "Exchange Rate Dynamics Redux," NBER Working Papers 4693, National Bureau of Economic Research, Inc.
- Maurice Obstfeld and Kenneth Rogoff., 1995. "Exchange Rate Dynamics Redux," Center for International and Development Economics Research (CIDER) Working Papers C95-048, University of California at Berkeley.
- Kathryn Dominguez & Jeffrey A. Frankel, 1990. "Does Foreign Exchange Intervention Work?," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 16.
- Miller, Marcus & Weller, Paul, 1990.
"Exchange Rate Bands with Price Inertia,"
CEPR Discussion Papers
421, C.E.P.R. Discussion Papers.
- Miller M. & Weller, P., 1990. "Exchange Rate Bands With Price Inertia," The Warwick Economics Research Paper Series (TWERPS) 337, University of Warwick, Department of Economics.
- Levin, Jay H., 1994. "On sluggish output adjustment and exchange rate dynamics," Journal of International Money and Finance, Elsevier, vol. 13(4), pages 447-458, August.
- Devereux, Michael B. & Purvis, Douglas D., 1990.
"Fiscal policy and the real exchange rate,"
European Economic Review,
Elsevier, vol. 34(6), pages 1201-1211, September.
- Mark P. Taylor, 1995. "The Economics of Exchange Rates," Journal of Economic Literature, American Economic Association, vol. 33(1), pages 13-47, March.
- Koustas, Z. & Ng, K.S., 1989. "Currency Substitution and Exchange Rate Dynamics: A Note," Working Papers 1989-02, Brock University, Department of Economics.
- Miller, Marcus H & Weller, Paul, 1990. "Currency Bubbles Which Affect Fundamentals: A Qualitative Treatment," Economic Journal, Royal Economic Society, vol. 100(400), pages 170-79, Supplemen.
- Lastrapes, William D, 1992. "Sources of Fluctuations in Real and Nominal Exchange Rates," The Review of Economics and Statistics, MIT Press, vol. 74(3), pages 530-39, August.
- Dornbusch, Rudiger, 1976. "Expectations and Exchange Rate Dynamics," Journal of Political Economy, University of Chicago Press, vol. 84(6), pages 1161-76, December.
- Dornbusch, Rudiger, 1982. "PPP Exchange-Rate Rules and Macroeconomic Stability," Journal of Political Economy, University of Chicago Press, vol. 90(1), pages 158-65, February.
- Martin Eichenbaum & Charles L. Evans, 1993.
"Some Empirical Evidence on the Effects of Monetary Policy Shocks on Exchange Rates,"
NBER Working Papers
4271, National Bureau of Economic Research, Inc.
- Martin Eichenbaum & Charles Evans, 1992. "Some empirical evidence on the effects of monetary policy shocks on exchange rates," Working Paper Series, Macroeconomic Issues 92-32, Federal Reserve Bank of Chicago.
- Pierdzioch, Christian, 2005. "Noise trading and delayed exchange rate overshooting," Journal of Economic Behavior & Organization, Elsevier, vol. 58(1), pages 133-156, September.
- Yihui Lan, 2003. "The Long-Term Behaviour of Exchange Rates, Part II: Aspects of Exchange-Rate Economics," Economics Discussion / Working Papers 03-06, The University of Western Australia, Department of Economics.
- Christian Pierdzioch, 2003. "Noise Trading and the Effects of Monetary Policy Shocks on Nominal and Real Exchange Rates," Kiel Working Papers 1140, Kiel Institute for the World Economy.
- Kant, Chander, 2005. "Capital mobility among advanced countries," Journal of Policy Modeling, Elsevier, vol. 27(9), pages 1067-1081, December.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Michael McNulty).
If references are entirely missing, you can add them using this form.