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Dornbusch's Overshooting Model After Twenty-Five Years

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  • Kenneth Rogoff

Abstract

This Mundell Fleming lecture at the International Monetary Fund’s 2001 annual research conference marks the 25th anniversary of Rudiger Dornbusch’s masterpiece, “Expectations and Exchange Rate Dynamics,” a seminal contribution to both policy and research in the field of international finance. This essay provides a simple overview of the model as well as some empirics, not only on exchange rates but on measures of the paper’s influence. Last, but not least, I offer some personal reflections on how Dornbusch conveyed the ideas in his “overshooting model” to inspire a generation of students.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 02/39.

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Length: 41
Date of creation: 01 Feb 2002
Date of revision:
Handle: RePEc:imf:imfwpa:02/39

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Related research

Keywords: Exchange rates; exchange rate; rational expectations; money supply; real exchange rate dynamics; inflation; effective exchange rate; flexible real exchange rate; monetary policy; price level; current account balance; real effective exchange rate; aggregate demand; foreign exchange; exchange rate volatility; floating real interest rates; exchange rate adjustment; monetary economics; nominal exchange rate; nominal interest rates; exchange rate expectations; exchange rate overshooting; real interest rate; home currency; exchange rate determination; exchange rate literature; relative price; exchange rate theory; rate of inflation; foreign currency; exchange rate movements; spot exchange rate regimes; exchange rate changes; exchange rate regime; exchange rate depreciation; fixed exchange rate pass; currency substitution; foreign exchange market; money growth;

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Citations

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Cited by:
  1. Heinlein, Reinhold & Krolzig, Hans-Martin, 2012. "On the construction of two-country cointegrated VAR models with an application to the UK and US," Annual Conference 2012 (Goettingen): New Approaches and Challenges for the Labor Market of the 21st Century 62310, Verein für Socialpolitik / German Economic Association.
  2. Hilde C. Bjørnland, 2009. "Monetary policy and exchange rate overshooting: Dornbusch was right after all," Working Paper 2009/09, Norges Bank.
  3. Hilde C. Bjørnland, 2006. "Monetary Policy and the Illusionary Exchange Rate Puzzle," Computing in Economics and Finance 2006 45, Society for Computational Economics.
  4. Jose De Gregorio & Eric Parrado, 2006. "Overshooting Meets Inflation Targeting," Working Papers Central Bank of Chile 394, Central Bank of Chile.
  5. Chowdhry, Bhagwan & Roll, Richard & Xia, Yihong, 2003. "Extracting Inflation from Stock Returns to Test Purchasing Power Parity," Working Papers 03-1, University of Pennsylvania, Wharton School, Weiss Center.
  6. Philippe Beaugrand, 2003. "Overshooting and Dollarization in the Democratic Republic of the Congo," IMF Working Papers 03/105, International Monetary Fund.
  7. Lane, P.R. & Ganelli, G., 2002. "Dynamic General Equilibrium Analysis: The Open Economy Dimension," CEG Working Papers 20026, Trinity College Dublin, Department of Economics.
  8. Arie Krampf, 2012. "The Consolidation of the Anglo-Saxon/European Consensus on Price Stability - From International Coordination to a Rule-Based Monetary Regime," KFG Working Papers p0047, Free University Berlin.
  9. Zsolt Darvas & G�bor Rappai & Zolt�n Schepp, 2006. "Uncovering Yield Parity: A new insight into the UIP puzzle through the stationarity of long maturity forward rates," DNB Working Papers 098, Netherlands Central Bank, Research Department.
  10. Sergio Clavijo & Carlos Varela, . "Flotación Cambiaria y Esterilización Monetaria: La Experiencia de Colombia," Borradores de Economia 256, Banco de la Republica de Colombia.
  11. Pippenger, John, 2008. "Freely Floating Exchange Rates Do Not Systematically Overshoot," University of California at Santa Barbara, Economics Working Paper Series qt97m8z6hw, Department of Economics, UC Santa Barbara.

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