Experimental Evidence on the Benefits of Eliminating Exchange Rate Uncertainties and Why Expected Utility Theory causes Economists to Miss Them
AbstractConclusions 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 InfoIf 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.
Bibliographic InfoPaper provided by University of Siena in its series Labsi Experimental Economics Laboratory University of Siena with number 010.
Date of creation: Oct 2006
Date of revision:
Find related papers by JEL classification:
- C90 - Mathematical and Quantitative Methods - - Design of Experiments - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-01-13 (All new papers)
- NEP-CBA-2007-01-13 (Central Banking)
- NEP-CBE-2007-01-13 (Cognitive & Behavioural Economics)
- NEP-EXP-2007-01-13 (Experimental Economics)
- NEP-IFN-2007-01-13 (International Finance)
- NEP-UPT-2007-01-13 (Utility Models & Prospect Theory)
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.:
- Yin-Wong Cheung & Daniel Friedman, 2008.
"Speculative Attacks: A Laboratory Study in Continuous Time,"
CESifo Working Paper Series
2420, CESifo Group Munich.
- Cheung, Yin-Wong & Friedman, Daniel, 2009. "Speculative attacks: A laboratory study in continuous time," Journal of International Money and Finance, Elsevier, vol. 28(6), pages 1064-1082, October.
- Yin-Wong Cheung & Daniel Friedman, 2009. "Speculative Attacks: A Laboratory Study in Continuous Time," Working Papers 072009, Hong Kong Institute for Monetary Research.
- Noussair, C.N. & Plot, C. & Riezman, R., 1997.
"The principles of exchange rate determination in an international finance experiment,"
Open Access publications from Tilburg University
urn:nbn:nl:ui:12-381116, Tilburg University.
- 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).
- Noussair, Charles N. & Plott, Charles R. & Riezman, Raymond. G., 1995. "The Principles of Exchange Rate Determination in an International Finance Experiment," Working Papers 908, California Institute of Technology, Division of the Humanities and Social Sciences.
- 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.
- 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.
- Andrew K. Rose, 1999. "One Money, One Market: Estimating the Effect of Common Currencies on Trade," NBER Working Papers 7432, National Bureau of Economic Research, Inc.
- Rose, Andrew, 1999. "One Money, One Market: Estimating the Effect of Common Currencies on Trade," Seminar Papers 678, Stockholm University, Institute for International Economic Studies.
- Selten, Reinhard, 1998.
"Features of experimentally observed bounded rationality,"
European Economic Review,
Elsevier, vol. 42(3-5), pages 413-436, May.
- Selten, Reinhard, . "Features of Experimentally Observed Bounded Rationality," Discussion Paper Serie B 421, University of Bonn, Germany, revised Nov 1997.
- Maurice Obstfeld, 2001.
"International Macroeconomics: Beyond the Mundell-Fleming Model,"
NBER Working Papers
8369, National Bureau of Economic Research, Inc.
- Maurice Obstfeld., 2001. "International Macroeconomics: Beyond the Mundell-Fleming Model," Center for International and Development Economics Research (CIDER) Working Papers C01-121, University of California at Berkeley.
- 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.
- Maurice Obstfeld, 2003. "International Macroeconomics: Beyond the Mundell-Fleming Model," International Finance 0303006, EconWPA.
- Eric O'N. Fisher, 2001.
"Purchasing Power Parity and Interest Parity in the Laboratory,"
01-07, Ohio State University, Department of Economics.
- Fisher, Eric O'N, 2001. "Purchasing Power Parity and Interest Parity in the Laboratory," Australian Economic Papers, Wiley Blackwell, vol. 40(4), pages 586-602, December.
- Eric Fisher, 2004. "Exploring Elements of Exchange Rate Theory in a Controlled Enivronment," Levine's Bibliography 122247000000000199, UCLA Department of Economics.
- 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.
- 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.
- Selten, Reinhard, 1996. "Aspiration Adaptation Theory," Discussion Paper Serie B 389, University of Bonn, Germany.
- 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.
- Adolfson, Malin, 1996.
"Exchange Rate Pass-Through to Swedish Import Prices,"
Working Paper Series in Economics and Finance
123, Stockholm School of Economics.
- Malin Adolfson, 1997. "Exchange rate pass-through to Swedish import prices," Finnish Economic Papers, Finnish Economic Association, vol. 10(2), pages 81-98, Autumn.
- 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.
- 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.
- Kimakova, Alena, 2008. "The political economy of exchange rate regime determination: Theory and evidence," Economic Systems, Elsevier, vol. 32(4), pages 354-371, December.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Alessandro Innocenti).
If references are entirely missing, you can add them using this form.