Advanced Search
MyIDEAS: Login to save this paper or follow this series

Experimental Evidence on the Benefits of Eliminating Exchange Rate Uncertainties and Why Expected Utility Theory causes Economists to Miss Them

Contents:

Author Info

  • Robin Pope

    ()

  • Reinhard Selten

    ()

  • Sebastian Kube

    ()

  • Jürgen von Hagen

    ()

Abstract

Conclusions favourable to flexible exchange rates typically accord with expected utility theory in ignoring the costs that exchange rate uncertainty generates for governments, central banks, firms and unions in: (i) choosing among available acts; and (ii) existing until learning the outcome of the chosen act. Allowing for these costs involves the stages of knowledge ahead framework, Pope (1983, 1995, 2005). A laboratory experiment suggests that (i) and (ii) together outweigh the advantages of having a flexible exchange rate as an additional instrument for managing a country’s employment, interest rate, price level and international competitiveness goals

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.econ-pol.unisi.it/labsi/labsi_paper/labsi10.pdf
Download Restriction: no

Bibliographic Info

Paper provided by University of Siena in its series Labsi Experimental Economics Laboratory University of Siena with number 010.

as in new window
Length:
Date of creation: Oct 2006
Date of revision:
Handle: RePEc:usi:labsit:010

Contact details of provider:
Postal: Piazza San Francesco 7, 53100 Siena
Web page: http://www.depfid.unisi.it/
More information through EDIRC

Related research

Keywords: experiment;

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
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.:
as in new window
  1. Yin-Wong Cheung & Daniel Friedman, 2008. "Speculative Attacks: A Laboratory Study in Continuous Time," CESifo Working Paper Series 2420, CESifo Group Munich.
  2. Peter B. Kenen, 2001. "International Financial Architecture: What's New? What's Missing?, The," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 335.
  3. Obstfeld, Maurice, 2001. "International Macroeconomics: Beyond the Mundell-Fleming Model," Center for International and Development Economics Research, Working Paper Series qt6796n8s0, Center for International and Development Economics Research, Institute for Business and Economic Research, UC Berkeley.
  4. Eric Fisher, 2004. "Exploring Elements of Exchange Rate Theory in a Controlled Enivronment," Levine's Bibliography 122247000000000199, UCLA Department of Economics.
  5. Noussair, C. & Plott, C.R. & Riezman, R., 1994. "The Principales of Exchange Rate Determination in an international Finance Experiment," Papers 94-021, Purdue University, Krannert School of Management - Center for International Business Education and Research (CIBER).
  6. Dr Peter Kenen, 2002. "Currency Unions and Trade: Variations on Themes by Rose and Persson," Reserve Bank of New Zealand Discussion Paper Series DP2002/08, Reserve Bank of New Zealand.
  7. Thomas J. Courchene, 1999. "Alternative North American Currency Arrangements: A Research Agenda," Canadian Public Policy, University of Toronto Press, vol. 25(3), pages 308-314, September.
  8. Selten, Reinhard, 1996. "Aspiration Adaptation Theory," Discussion Paper Serie B 389, University of Bonn, Germany.
  9. Selten, Reinhard, . "Features of Experimentally Observed Bounded Rationality," Discussion Paper Serie B 421, University of Bonn, Germany, revised Nov 1997.
  10. von Hagen, Jürgen & Zhou, Jizhong, 2004. "The Choice of Exchange Rate Regime in Developing Countries: A Multinational Panel Analysis," CEPR Discussion Papers 4227, C.E.P.R. Discussion Papers.
  11. Rose, Andrew K, 1999. "One Money, One Market: Estimating the Effect of Common Currencies on Trade," CEPR Discussion Papers 2329, C.E.P.R. Discussion Papers.
  12. Malin Adolfson, 1997. "Exchange rate pass-through to Swedish import prices," Finnish Economic Papers, Finnish Economic Association, vol. 10(2), pages 81-98, Autumn.
  13. Eric O'N. Fisher, 2001. "Purchasing Power Parity and Interest Parity in the Laboratory," Working Papers 01-07, Ohio State University, Department of Economics.
Full references (including those not matched with items on IDEAS)

Citations

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

Cited by:
  1. Kimakova, Alena, 2008. "The political economy of exchange rate regime determination: Theory and evidence," Economic Systems, Elsevier, vol. 32(4), pages 354-371, December.
  2. Robin Pope & Reinhard Selten & Johannes Kaiser & Sebastian Kube & Jürgen Hagen, 2012. "Exchange rate determination: a theory of the decisive role of central bank cooperation and conflict," International Economics and Economic Policy, Springer, vol. 9(1), pages 13-51, March.
  3. Robin Pope, 2009. "Beggar-Thy-Neighbour Exchange Rate Regime Misadvice from Misapplications of Mundell (1961 ) and the Remedy," The World Economy, Wiley Blackwell, vol. 32(2), pages 326-350, 02.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:usi:labsit:010. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Alessandro Innocenti).

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.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with 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 profile, as there may be some citations waiting for confirmation.

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