Multiple Reserve Requirements, Exchange Rates, Sudden Stops and Equilibrium Dynamics in a Small Open Economy
AbstractWe model a typical Asian-crisis-economy using dynamic general equilibrium techniques. Meaningful exchange rates obtain from nontrivial demands for fiat currencies. Sudden stops/bank-panics are possible, and key for evaluating the relative merits of alternative exchange rate regimes in promoting stability. Strategic complementarities contribute to the severe indeterminacy of the continuum of equilibria; there is a strong association between the scope for existence and indeterminacy of equilibria, the properties along dynamic paths and the underlying policy regime. Binding multiple reserve requirements reduce the scope for financial fragility and panic equilibria; backing the money supply acts as a stabilizer only in fixed regimes.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 13802.
Date of creation: 05 Mar 2009
Date of revision:
Sudden stops; Exchange rate regimes; Multiple reserve requirements;
Other versions of this item:
- Paula Hernandez-Verme & Wen-Yao Wang, 2009. "Multiple Reserve Requirements, Exchange Rates, Sudden Stops and Equilibrium Dynamics in a Small Open Economy," Department of Economics and Finance Working Papers EC200905, Universidad de Guanajuato, Department of Economics and Finance.
- Hernandez-Verme, Paula & Wang, Wen-Yao, 2009. "Multiple Reserve Requirements, Exchange Rates, Sudden Stops and Equilibrium Dynamics in a Small Open Economy," MPRA Paper 16748, University Library of Munich, Germany, revised 11 Aug 2009.
- E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
- E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
- F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-03-14 (All new papers)
- NEP-DGE-2009-03-14 (Dynamic General Equilibrium)
- NEP-IFN-2009-03-14 (International Finance)
- NEP-MAC-2009-03-14 (Macroeconomics)
- NEP-MON-2009-03-14 (Monetary Economics)
- NEP-OPM-2009-03-14 (Open Economy Macroeconomic)
- NEP-SEA-2009-03-14 (South East Asia)
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