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Interest Rate Volatility And Exchange Risk: New Rules For A Common Monetary Standard

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  • RONALD I. McKINNON

Abstract

How does the choice of an exchange rate regime influence the volatility of interest rates? Are floating exchange rates useful "shock absorbers" that dampen fluctuations in domestic interest rates and prices or do they create additional risk that increases interest rate volatility and segments the international capital market? The answers are best seen in historical perspective. Copyright 1990 Western Economic Association International.

Suggested Citation

  • RONALD I. McKINNON, 1990. "Interest Rate Volatility And Exchange Risk: New Rules For A Common Monetary Standard," Contemporary Economic Policy, Western Economic Association International, vol. 8(2), pages 1-17, April.
  • Handle: RePEc:bla:coecpo:v:8:y:1990:i:2:p:1-17
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    File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1465-7287.1990.tb00587.x
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    References listed on IDEAS

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    1. Frenkel, Jacob A & Mussa, Michael L, 1980. "The Efficiency of Foreign Exchange Markets and Measures of Turbulence," American Economic Review, American Economic Association, vol. 70(2), pages 374-381, May.
    2. Frenkel, Jacob A. & Razin, Assaf, 1980. "Stochastic prices and tests of efficiency of foreign exchange markets," Economics Letters, Elsevier, vol. 6(2), pages 165-170.
    3. Jacob A. Frenkel & Michael L. Mussa, 1980. "Efficiency of Foreign Exchange Markets and Measures of Turbulence," NBER Working Papers 0476, National Bureau of Economic Research, Inc.
    4. McKinnon, Ronald I, 1988. "Monetary and Exchange Rate Policies for International Financial Stability: A Proposal," Journal of Economic Perspectives, American Economic Association, vol. 2(1), pages 83-103, Winter.
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    Cited by:

    1. Eichengreen, Barry, 1993. "International Monetary Arrangements for the 21st Century," Center for International and Development Economics Research (CIDER) Working Papers 233202, University of California-Berkeley, Department of Economics.
    2. repec:bis:bisbps:95 is not listed on IDEAS
    3. Lawrence Goldberg & James Lothian & John Okunev, 2003. "Has International Financial Integration Increased?," Open Economies Review, Springer, vol. 14(3), pages 299-317, July.
    4. Stijn Claessens & M. Ayhan Kose, 2017. "Asset prices and macroeconomic outcomes: A survey," CAMA Working Papers 2017-76, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    5. MKC Jackson, 2002. "Reserve Bank Independence : A Post Keynesian Perspective," South African Journal of Economics, Economic Society of South Africa, vol. 70(1), pages 29-52, March.
    6. Ronald McKinnon, 1990. "Why floating exchange rates fall: A reconsideration of the liquidity trap," Open Economies Review, Springer, vol. 1(3), pages 229-250, October.

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