Managing Currency Pegs
The combination of a fixed exchange rate and downward nominal wage rigidity creates a real rigidity. In turn, this real rigidity makes the economy prone to involuntary unemployment during external crises. This paper presents a graphical analysis of alternative policy strategies aimed at mitigating this source of inefficiency. First- and second-best monetary and fiscal solutions are analyzed. Second-best solutions are prudential, whereas first-best solutions are not.
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Volume (Year): 102 (2012)
Issue (Month): 3 (May)
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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.:
- Lahiri, Amartya, 2001.
"Exchange rate based stabilizations under real frictions: The role of endogenous labor supply,"
Journal of Economic Dynamics and Control,
Elsevier, vol. 25(8), pages 1157-1177, August.
- Amartya Lahiri, 1996. "Exchange Rate Based Stabilizations Under Real Frictions: The role of endagenous labor supply," UCLA Economics Working Papers 759, UCLA Department of Economics.
- Uribe, Martin, 1997.
"Exchange-rate-based inflation stabilization: The initial real effects of credible plans,"
Journal of Monetary Economics,
Elsevier, vol. 39(2), pages 197-221, July.
- Martin Uribe, 1995. "Exchange-rate based inflation stabilization: the initial real effects of credible plans," International Finance Discussion Papers 503, Board of Governors of the Federal Reserve System (U.S.).
- Calvo, Guillermo A, 1986. "Temporary Stabilization: Predetermined Exchange Rates," Journal of Political Economy, University of Chicago Press, vol. 94(6), pages 1319-29, December.
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