IDEAS home Printed from https://ideas.repec.org/p/qmw/qmwecw/166.html
   My bibliography  Save this paper

Evaluating the Extended Target Zone Proposal for the G3

Author

Listed:
  • D. Currie
  • S. Wren-Lewis

Abstract

This paper evaluates the extended target zone proposal of Williamson and Miller using the National Institute world economic model (GEM). Williamson and Miller's proposals envisage that real exchange rates will be controlled by movements in relative interest rates, that fiscal policy will be used to steer nominal demand towards a target which depends on capacity utilization, inflation and the current balance, and that the average level of world interest rates will be used to control global nominal demand. We evaluate the performance of these rules for the United States, Germany and Japan over the period 1975-84, using control methods to determine the best choice of parameters in the feedback rules. We then consider how history would have differed from actual events had such rules been in place. The results suggest that such rules would have led to a significant improvement in economic performance: exchange rate variability would have been reduced and the dramatic increase in United States interest rates which took place after 1980 would have been avoided.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • D. Currie & S. Wren-Lewis, 1987. "Evaluating the Extended Target Zone Proposal for the G3," Working Papers 166, Queen Mary University of London, School of Economics and Finance.
    • Handle: RePEc:qmw:qmwecw:166
    as

    Download full text from publisher

    File URL: https://www.qmul.ac.uk
    Download Restriction: no
    ---><---

    Other versions of this item:

    Citations

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


    Cited by:

    1. Guglielmo Caporale & Michael Chui & Stephen Hall & Brian Henry, 2003. "Evaluating the Gains to Cooperation in the G-3," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 30(4), pages 337-356, December.
    2. Michael Artis, 1993. "The Role of the Exchange Rate in Monetary Policy - the Experience of Other Countries," RBA Annual Conference Volume (Discontinued), in: Adrian Blundell-Wignall (ed.),The Exchange Rate, International Trade and the Balance of Payments, Reserve Bank of Australia.
    3. Gerardo Esquivel & Felipe Larrain B., 2002. "The Impact of G-3 Exchange Rate Volatility on Developing Countries," CID Working Papers 86, Center for International Development at Harvard University.
    4. Miller, M. & Weller, P. & Williamson, J., 1989. "The Stabilizing Properties Of Target Zones," The Warwick Economics Research Paper Series (TWERPS) 318, University of Warwick, Department of Economics.
    5. Nicos Christodoulakis & Anthony Garratt & Paul Levine, 1995. "Simple Rules, Robustness and Alternative Assignments for G3 Policy Cooperation," The World Economy, Wiley Blackwell, vol. 18(1), pages 137-159, January.
    6. Barrell, Ray & Dury, Karen & Hurst, Ian, 2003. "International monetary policy coordination: an evaluation using a large econometric model," Economic Modelling, Elsevier, vol. 20(3), pages 507-527, May.
    7. Peter Mooslechner & Martin Schuerz, 1999. "International Macroeconomic Policy Coordination: Any Lessons for EMU? A Selective Survey of the Literature," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 26(3), pages 171-199, September.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:qmw:qmwecw:166. See general information about how to correct material in RePEc.

    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.

    We have no bibliographic references for this item. You can help adding them by using 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Nicholas Owen (email available below). General contact details of provider: https://edirc.repec.org/data/deqmwuk.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.