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Exchange Rate Management: Intertemporal Tradoffs

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Author Info
Elhanan Helpman
Assaf Razin

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Abstract

The 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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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 1590.

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Date of creation: Apr 1987
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Handle: RePEc:nbr:nberwo:1590

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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.:
  1. Lucas, Robert Jr., 1982. "Interest rates and currency prices in a two-country world," Journal of Monetary Economics, Elsevier, vol. 10(3), pages 335-359. [Downloadable!] (restricted)
  2. Helpman, Elhanan & Razin, Assaf, 1984. "The role of saving and investment in exchange rate determination under alternative monetary mechanisms," Journal of Monetary Economics, Elsevier, vol. 13(3), pages 307-325, May. [Downloadable!] (restricted)
  3. Olivier J. Blanchard, 1984. "Debt, Deficits and Finite Horizons," NBER Working Papers 1389, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  4. Helpman, Elhanan, 1981. "An Exploration in the Theory of Exchange-Rate Regimes," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 865-90, October. [Downloadable!] (restricted)
  5. Barro, Robert J, 1974. "Are Government Bonds Net Wealth?," Journal of Political Economy, University of Chicago Press, vol. 82(6), pages 1095-1117, Nov.-Dec.. [Downloadable!] (restricted)
  6. Aschauer, David & Greenwood, Jeremy, 1983. "A Further Exploration in the Theory of Exchange Rate Regimes," Journal of Political Economy, University of Chicago Press, vol. 91(5), pages 868-75, October. [Downloadable!] (restricted)
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(explanations, 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.)

  1. Aysan, Ahmet Faruk, 2006. "The Role of Distribution of the Income Shares of Individuals in Tradables and Nontradables on Exchange Rate Fluctuations and Delay of Stabilizations," MPRA Paper 5485, University Library of Munich, Germany. [Downloadable!]
    Other versions:
  2. Leonardo Leiderman & Assaf Razin, 1989. "Testing Ricardian Neutrality with an Intertemporal Stochastic Model," NBER Working Papers 2258, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  3. Leiderman, Leonardo & Liviatan, Nissan, 1989. "Macroeconomic performance before and after disinflation in Israel," Policy Research Working Paper Series 311, The World Bank. [Downloadable!]
  4. Enrique G. Mendoza, 2002. "Why Should Emerging Economies Give up National Currencies: A Case for 'Institutions Substitution'," NBER Working Papers 8950, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  5. Enrique G. Mendoza, 2001. "The International Macroeconomics of Taxation and the Case Against European Tax Harmonization," NBER Working Papers 8217, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  6. Kiguel, Miguel & Liviatan, Nissan, 1990. "The business cycle associated with exchange-rate-based stabilization," Policy Research Working Paper Series 513, The World Bank. [Downloadable!]
  7. Reinhart, Carmen & Vegh, Carlos, 1994. "Intertemporal consumption substitution and inflation stabilization:An empirical investigation," MPRA Paper 13427, University Library of Munich, Germany. [Downloadable!]
  8. Reinhart, Carmen & Vegh, Carlos, 1994. "Inflation stabilization in chronic inflation countries: The empirical evidence," MPRA Paper 13689, University Library of Munich, Germany. [Downloadable!]
  9. Enrique Mendoza, 2002. "¿Por qué deben las economías emergentes renunciar a su moneda nacional? El argumento a favor," RES Working Papers 4310, Inter-American Development Bank, Research Department. [Downloadable!]
  10. Enrique G. Mendoza & Martin Uribe, 1999. "The Business Cycles of Balance-of-Payment Crises: A Revision of Mundellan Framework," NBER Working Papers 7045, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  11. Aysan, Ahmet Faruk, 2006. "Distributional Effects of Boom-Bust Cycles in Developing Countries with Financial Frictions," MPRA Paper 5484, University Library of Munich, Germany. [Downloadable!]
    Other versions:
  12. Junning Cai & Byron Gangnes, 2004. "Open Capital Account: Concrete Wealth or Paper Wealth," International Finance 0401002, EconWPA. [Downloadable!]
  13. Reinhart, Carmen & Vegh, Carlos, 1995. "Nominal interest rates, consumption booms, and lack of credibility: A quantitative examination," MPRA Paper 13898, University Library of Munich, Germany. [Downloadable!]
    Other versions:
  14. Condon, Timothy & Corbo, Vittorio & De Melo, Jaime, 1989. "Exchange rate based disinflation, wage rigidity, and capital inflows : tradeoffs for Chile, 1977-81," Policy Research Working Paper Series 146, The World Bank. [Downloadable!]
    Other versions:
  15. Barbara Annicchiarico, 2003. "Fiscal Policy and Exchange Rates," CEIS Research Paper 7, Tor Vergata University, CEIS. [Downloadable!]
    Other versions:
  16. Barbara Annicchiarico, 2002. "Fiscal Policy And Exchange Rates," Departmental Working Papers 174, Tor Vergata University, CEIS. [Downloadable!]
  17. Martin Uribe, 1997. "Habit formation and the comovement of prices and consumption during exchange-rate based stabilization programs," International Finance Discussion Papers 598, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
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