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Exchange Rate Dynamics Redux

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  • Obstfeld, Maurice
  • Rogoff, Kenneth S.

Abstract

We develop an analytically tractable two-country model that marries a full account of global macroeconomic dynamics to a supply framework based on monopolistic competition and sticky nominal prices. The model offers simple and intuitive predictions about exchange rates and current accounts that sometimes differ sharply from those of either modern flexible-price intertemporal models or traditional sticky-price Keynesian models. Our analysis leads to a novel perspective on the international welfare spillovers due to monetary and fiscal policies.

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File URL: http://dash.harvard.edu/bitstream/handle/1/12491026/Rogoff_ExchangeRate.pdf
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Bibliographic Info

Paper provided by Harvard University Department of Economics in its series Scholarly Articles with number 12491026.

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Date of creation: 1995
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Publication status: Published in Journal of Political Economy -Chicago-
Handle: RePEc:hrv:faseco:12491026

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Phone: 617-495-2144
Fax: 617-495-7730
Web page: http://www.economics.harvard.edu/
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  1. Startz, Richard, 1989. "Monopolistic Competition as a Foundation for Keynesian Macroeconomic Models," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 104(4), pages 737-52, November.
  2. David Romer, 1991. "Openness and inflation: theory and evidence," Proceedings, Federal Reserve Bank of San Francisco, Federal Reserve Bank of San Francisco, issue Nov.
  3. Obstfeld, Maurice & Rogoff, Kenneth, 1995. "Exchange Rate Dynamics Redux," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 103(3), pages 624-60, June.
  4. Lee E. Ohanian & Alan C. Stockman, 1997. "Short-run independence of monetary policy under pegged exchange rates and effects of money on exchange rates and interest rates," Proceedings, Federal Reserve Bank of Cleveland, Federal Reserve Bank of Cleveland, pages 783-814.
  5. Eichengreen, Barry, 1996. "Golden Fetters: The Gold Standard and the Great Depression, 1919-1939," OUP Catalogue, Oxford University Press, Oxford University Press, number 9780195101133, October.
  6. Jeffrey D. Sachs, 1981. "The Current Account and macroeconomic Adjustment in the 1970s," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, Economic Studies Program, The Brookings Institution, vol. 12(1), pages 201-282.
  7. Akerlof, George A & Yellen, Janet L, 1985. "A Near-rational Model of the Business Cycle, with Wage and Price Intertia," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 100(5), pages 823-38, Supp..
  8. Laurence M. Ball & David Romer, 1987. "Are Prices Too Sticky?," NBER Working Papers, National Bureau of Economic Research, Inc 2171, National Bureau of Economic Research, Inc.
  9. Robert E. Hall, 1986. "Market Structure and Macroeconomic Fluctuations," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, Economic Studies Program, The Brookings Institution, vol. 17(2), pages 285-338.
  10. Obstfeld, Maurice, 1982. "Aggregate Spending and the Terms of Trade: Is There a Laursen-Metzler Effect?," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 97(2), pages 251-70, May.
  11. Blanchard, Olivier Jean & Kiyotaki, Nobuhiro, 1987. "Monopolistic Competition and the Effects of Aggregate Demand," American Economic Review, American Economic Association, American Economic Association, vol. 77(4), pages 647-66, September.
  12. Mankiw, N Gregory, 1985. "Small Menu Costs and Large Business Cycles: A Macroeconomic Model," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 100(2), pages 529-38, May.
  13. Akerlof, George A & Yellen, Janet L, 1985. "Can Small Deviations from Rationality Make Significant Differences to Economic Equilibria?," American Economic Review, American Economic Association, American Economic Association, vol. 75(4), pages 708-20, September.
  14. Mankiw, N Gregory & Summers, Lawrence H, 1986. "Money Demand and the Effects of Fiscal Policies," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 18(4), pages 415-29, November.
  15. Julio J. Rotemberg & Michael Woodford, 1989. "Oligopolistic Pricing and the Effects of Aggregate Demand on Economic Activity," NBER Working Papers, National Bureau of Economic Research, Inc 3206, National Bureau of Economic Research, Inc.
  16. Frenkel, Jacob A, 1976. " A Monetary Approach to the Exchange Rate: Doctrinal Aspects and Empirical Evidence," Scandinavian Journal of Economics, Wiley Blackwell, Wiley Blackwell, vol. 78(2), pages 200-224.
  17. Dornbusch, Rudiger, 1976. "Expectations and Exchange Rate Dynamics," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 84(6), pages 1161-76, December.
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