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Pricing-to-Market, the Interest-Rate Rule, and the Exchange Rate

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  • Maurice Obstfeld

Abstract

Even when the exchange-rate plays no expenditure-switching role, countries may wish to have flexible exchange rates in order to free the domestic interest rate as a stabilization tool. In a setting with nontraded goods, exchange-rate movements may also enhance international risk sharing.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 12699.

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Date of creation: Nov 2006
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Publication status: published as Reinhart, Carmen, Carlos Vegh, and Andres Velasco (eds.) Money, Crises, and Transition: Essays in Honor of Guillermo A. Calvo. Cambridge, MA: MIT Press, 2008.
Handle: RePEc:nbr:nberwo:12699

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  1. Maurice Obstfeld and Kenneth Rogoff., 1999. "New Directions for Stochastic Open Economy Models," Center for International and Development Economics Research (CIDER) Working Papers C99-107, University of California at Berkeley.
  2. Michael B. Devereux & Charles Engel, 2003. "Monetary Policy in the Open Economy Revisited: Price Setting and Exchange-Rate Flexibility," Review of Economic Studies, Oxford University Press, vol. 70(4), pages 765-783.
  3. David K. Backus & Gregor W. Smith, 1993. "Consumption and Real Exchange Rates in Dynamic Economies with Non-Traded Goods," Working Papers 1252, Queen's University, Department of Economics.
  4. Charles Engel, 2002. "Expenditure Switching and Exchange Rate Policy," NBER Working Papers 9016, National Bureau of Economic Research, Inc.
  5. Gianluca Benigno & Pierpaolo Benigno, 2003. "Price Stability in Open Economies," Review of Economic Studies, Oxford University Press, vol. 70(4), pages 743-764.
  6. Guillermo A. Calvo & Carmen M. Reinhart, 2002. "Fear Of Floating," The Quarterly Journal of Economics, MIT Press, vol. 117(2), pages 379-408, May.
  7. Margarida Duarte, 2004. "Monetary policy and the adjustment to country-specific shocks," Economic Quarterly, Federal Reserve Bank of Richmond, issue Spr, pages 21-40.
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Cited by:
  1. Duarte, Margarida & Obstfeld, Maurice, 2008. "Monetary policy in the open economy revisited: The case for exchange-rate flexibility restored," Journal of International Money and Finance, Elsevier, vol. 27(6), pages 949-957, October.
  2. Hoffmann, Mathias & Holtemöller, Oliver, 2009. "Transmission of nominal exchange rate changes to export prices and trade flows and implications for exchange rate policy," Discussion Paper Series 1: Economic Studies 2009,21, Deutsche Bundesbank, Research Centre.
  3. Philippe Aghion & Philippe Bacchetta & Romain Ranciere & Kenneth Rogoff, 2006. "Exchange Rate Volatility and Productivity Growth: The Role of Financial Development," NBER Working Papers 12117, National Bureau of Economic Research, Inc.
  4. Carlos Cortinhas, 2009. "Exchange Rate Pass-Through In Asean: Implications For The Prospects Of Monetary Integration In The Region," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 54(04), pages 657-687.
  5. Philippe Aghion & Philippe Bacchetta & Romain Rancière & Kenneth Rogoff, 2005. "Productivity growth and the exchange rate regime: The role of financial development," Economics Working Papers 850, Department of Economics and Business, Universitat Pompeu Fabra.
  6. repec:ebl:ecbull:v:5:y:2008:i:23:p:1-9 is not listed on IDEAS
  7. Alex Luiz Ferreira, 2004. "Leaning Against the Parity," Studies in Economics 0413, Department of Economics, University of Kent.
  8. Hyeongwoo Kim, 2008. "Country-specific shocks and optimal monetary policy," Economics Bulletin, AccessEcon, vol. 5(23), pages 1-9.

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