Exchange Rate Management: Intertemporal Tradoffs
AbstractThe management of the exchange rate is possible only if the government pursues a monetary-fiscal policy mix which is consistent with its exchange rate targets. In this paper with uncertainty concerning the length of individual life the real consequences of exchange rate management depend on the precise time pattern of the accompanying policies. We look at a stylized example of disinflation by means of exchange rate targetting with an initial overvalued currency and a delayed accompanying absorbtion policy. The result will be an intergenerational redistribution of welfare whereby spending rises during the initial period and falls during later periods, while the external debt rises in all periods.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 1590.
Date of creation: Mar 1985
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Publication status: published as Helpman, Elhanan and Assaf Razin. "Exchange Rate Management: Intertempora Tradeoffs," American Economic Review, Vol. 77, No. 1, (March 1987), pp. 10 7-123.
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- Helpman, Elhanan & Razin, Assaf, 1987. "Exchange Rate Management: Intertemporal Tradeoffs," American Economic Review, American Economic Association, American Economic Association, vol. 77(1), pages 107-23, March.
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