Advanced Search
MyIDEAS: Login to save this article or follow this journal

Optimal Exchange Rate Regimes: Sunspots, Currency Crises, and Welfare

Contents:

Author Info

  • Carsten Krabbe NIELSEN

    (Istituto di Politica Economica - Università Cattolica di Milano)

Abstract

In this two country OLG model there is a potential role for active governments since markets are incomplete. There are many coordinated policies (exchange rate regimes) that result in an optimal allocation if extrinsic uncertainty plays no role. However, if we take into account the possibility of sunspot equilibria, the set of optimal policies is drastically reduced. Whenever there is a possibility of influence by extrinsic uncertainty, one or both governments may seek to avoid this by intervening on the foreign exchange markets. When only one country does so, this may lead to a currency crisis, where the central bank is active and is with positive probability unsuccessful in its attempt to defend its currency. If the two countries form a monetary union, a coordinated fiscal policy is needed as a substitute for an optimal exchange rate regime.

Download Info

If 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.
File URL: http://riss.vitaepensiero.it/scheda-articolo_digital/carsten-krabbe-nielsen/optimal-exchange-rate-regimes-sunspots-currency-crises-and-welfare-000518_2004_0002_0039-150789.html
Download Restriction: Yes

Bibliographic Info

Article provided by Vita e Pensiero, Pubblicazioni dell'Universita' Cattolica del Sacro Cuore in its journal Rivista Internazionale di Scienze Sociali.

Volume (Year): 112 (2004)
Issue (Month): 2 ()
Pages: 155-194

as in new window
Handle: RePEc:vep:journl:y:2004:v:112:i:2:p:155-194

Contact details of provider:

Related research

Keywords: currency crisis; exchange rate policies; monetary union; OLG model; perfect currency;

Find related papers by JEL classification:

References

No references listed on IDEAS
You can help add them by filling out this form.

Citations

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:vep:journl:y:2004:v:112:i:2:p:155-194. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Vep - Vita e Pensiero).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.