Advanced Search
MyIDEAS: Login to save this paper or follow this series

Optimal and Time Consistent Exchange Rate Management in an Overlapping Generations Economy

Contents:

Author Info

  • Jonathan Eaton

Abstract

This paper analyzes exchange rate management in a simple overlapping generations model. This framework is used to evaluate alternative policies in terms of their implications for the welfare of individuals in the economy.The analysis identifies two objectives of monetary policy,providing adesirable store of value and collecting seigniorage. When the chief concern is to provide a desirable store of value (as when the monetary authority's major constituency consists of the asset holders of the economy), a policy of fixing the exchange rate does better when shocks are primarily of domestic origin while floating becomes more desirable when foreign shocks predominate. When seigniorage concerns are paramount (as when the authority's constituency is the young generation) flexible rates do better.When seigniorage concernsare paramount and when the monetary authority cannot establish a reputation for conducting monetary policy in a way that makes the currency a desirable store of value, a national currency may not be viable in the absence of exchange controls. Such controls may be justified in this situation.

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://www.nber.org/papers/w1196.pdf
Download Restriction: no

Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 1196.

as in new window
Length:
Date of creation: Aug 1983
Date of revision:
Publication status: published as Eaton, Jonathan. "Optimal and Time Consistent Exchange-Rate Management inan Overlapping-Generations Economy." Journal of International Money and Finance, Vol. 4, No. 1, (March 1985), pp. 83-100.
Handle: RePEc:nbr:nberwo:1196

Note: ITI IFM
Contact details of provider:
Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Phone: 617-868-3900
Email:
Web page: http://www.nber.org
More information through EDIRC

Related research

Keywords:

Other versions of this item:

References

References listed on IDEAS
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.:
as in new window
  1. Kydland, Finn, 1977. "Equilibrium solutions in dynamic dominant-player models," Journal of Economic Theory, Elsevier, vol. 15(2), pages 307-324, August.
  2. Aizenman, Joshua, 1981. "The use of the balance of payments as a shock absorber in fixed rate and managed float systems," Journal of International Economics, Elsevier, vol. 11(4), pages 479-486, November.
  3. Eaton, Jonathan & Turnovsky, Stephen J, 1984. "The Forward Exchange Market, Speculation, and Exchange Market Intervention," The Quarterly Journal of Economics, MIT Press, vol. 99(1), pages 45-69, February.
  4. David A. Hsieh, 1982. "International Risk Sharing and the Choice of Exchange-Rate Regime," NBER Working Papers 0842, National Bureau of Economic Research, Inc.
  5. Alan C. Stockman, 1978. "A Theory of Exchange Rate Determination," UCLA Economics Working Papers 122, UCLA Department of Economics.
  6. Helpman, Elhanan & Razin, Assaf, 1978. "Towards a consistent comparison of alternative exchange rate systems," Economics Letters, Elsevier, vol. 1(1), pages 33-36.
  7. Buiter, Willem H & Eaton, Jonathan, 1980. "Policy Decentralisation and Exchange Rate Management in Interdependent Economies," The Warwick Economics Research Paper Series (TWERPS) 172, University of Warwick, Department of Economics.
  8. Paul A. Samuelson, 1958. "An Exact Consumption-Loan Model of Interest with or without the Social Contrivance of Money," Journal of Political Economy, University of Chicago Press, vol. 66, pages 467.
  9. Calvo, Guillermo A, 1978. "On the Time Consistency of Optimal Policy in a Monetary Economy," Econometrica, Econometric Society, vol. 46(6), pages 1411-28, November.
  10. Kareken, John & Wallace, Neil, 1981. "On the Indeterminacy of Equilibrium Exchange Rates," The Quarterly Journal of Economics, MIT Press, vol. 96(2), pages 207-22, May.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Flood, Robert P. & Hodrick, Robert J., 1986. "Real aspects of exchange rate regime choice with collapsing fixed rates," Journal of International Economics, Elsevier, vol. 21(3-4), pages 215-232, November.
  2. Charles Engel, 2000. "Optimal Exchange Rate Policy:The Influence of Price-Setting and Asset Markets," Discussion Papers in Economics at the University of Washington 0020, Department of Economics at the University of Washington.
  3. Michael Devereux & Charles Engel, 2000. "The Optimal Choice of Exchange-Rate Regime: Price-Setting Rules and Internationalized Production," Discussion Papers in Economics at the University of Washington 0022, Department of Economics at the University of Washington.
  4. BEN ALI Mohamed Sami, 2006. "Capital Account Liberalization And Exchange Rate Regime Choice, What Scope For Flexibility In Tunisia?," William Davidson Institute Working Papers Series wp815, William Davidson Institute at the University of Michigan.
  5. Klundert, T.C.M.J. van de & Ploeg, F. van der, 1987. "Wage rigidity and capital mobility in an optimizing model of a small open economy," Research Memorandum 277, Tilburg University, Faculty of Economics and Business Administration.
  6. Michael B. Devereux & Charles Engel, 1998. "Fixed vs. Floating Exchange Rates: How Price Setting Affects the Optimal Choice of Exchange-Rate Regime," NBER Working Papers 6867, National Bureau of Economic Research, Inc.
  7. Zhang, Zhichao, 2001. "Choosing an exchange rate regime during economic transition: The case of China," China Economic Review, Elsevier, vol. 12(2-3), pages 203-226.

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:nbr:nberwo:1196. 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: ().

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.