Fixed vs. floating exchange rates: a dynamic general equilibrium analysis
AbstractIn this study we contrast fixed and floating exchange rate regimes in a dynamic general equilibrium model. We find that the fundamental difference in the regimes is in the courses they imply for monetary policies. Because of policy coordination requirements, a tighter monetary policy needed to maintain a fixed exchange rate may necessitate a tightening in budget policy as well. We show that under some initial conditions voters or a social planner will favor one regime, but under other conditions they will favor the other. However, the choices of voters and a social planner are almost diametrically opposed.
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 InfoPaper provided by Federal Reserve Bank of Minneapolis in its series Staff Report with number 194.
Date of creation: 1995
Date of revision:
Publication status: Published in European Economic Review (Vol 42, 1998, pp. 1221-1249)
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.:
- Preston J. Miller & Neil Wallace, 1985. "International coordination of macroeconomic policies: a welfare analysis," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Spr.
- Michael J. Stutzer, 1985. "The statewide economic impact of small-issue industrial revenue bonds," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Spr.
- Preston J. Miller & Richard M. Todd, 1992. "Real effects of monetary policy in a world economy," Staff Report 154, Federal Reserve Bank of Minneapolis.
- Rebelo, Sérgio, 1997.
"What Happens When Countries Peg Their Exchange Rates? (The Real Side of Monetary Reforms),"
CEPR Discussion Papers
1692, C.E.P.R. Discussion Papers.
- Sergio Rebelo, 1997. "What Happens When Countries Peg Their Exchange Rates? (The Real Side of Monetary Reforms)," NBER Working Papers 6168, National Bureau of Economic Research, Inc.
- Thomas J. Sargent & Neil Wallace, 1981. "Some unpleasant monetarist arithmetic," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Fall.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Janelle Ruswick).
If references are entirely missing, you can add them using this form.