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Exchange rate regimes and macroeconomic stability: the case of Sweden

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  • Anders Bergvall

Abstract

In this paper I investigate the relevance of the exchange rate regime for macroeconomic stability. I simulate hypothetical macroeconomic developments under different hypothetical regimes in Sweden during the period 1974--1994. The main question is how stable output would have been if Sweden had had a floating exchange rate regime. Would it have been better with a floating exchange rate than the actual quasi-fixed regime? Also the development with an irrevocably fixed exchange rate is investigated. The results show that the choice of exchange rate regime does influence macroeconomic stability. More precisely, output volatility under the actual exchange rate regime is about the same as under the hypothetical floating exchange rate regime, but output is substantially more volatile under the hypothetical fixed exchange rate regimes. Copyright 2005, Oxford University Press.

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  • Anders Bergvall, 2005. "Exchange rate regimes and macroeconomic stability: the case of Sweden," Oxford Economic Papers, Oxford University Press, vol. 57(3), pages 422-446, July.
  • Handle: RePEc:oup:oxecpp:v:57:y:2005:i:3:p:422-446
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    File URL: http://hdl.handle.net/10.1093/oep/gpi016
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    References listed on IDEAS

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    Cited by:

    1. Aysun, Uluc, 2008. "Automatic stabilizer feature of fixed exchange rate regimes," Emerging Markets Review, Elsevier, vol. 9(4), pages 302-328, December.
    2. Frank Bohn, 2006. "Greed, impatience and exchange rate determination," Working Papers 200605, School of Economics, University College Dublin.
    3. Uluc Aysun, 2006. "Automatic Stabilizer Feature of Fixed Exchange Rate Regimes in Emerging Markets," Working papers 2006-27, University of Connecticut, Department of Economics, revised Aug 2008.
    4. Uluc Aysun, 2006. "Testing for Balance Sheet Effects in Emerging Market Countries," Working papers 2006-28, University of Connecticut, Department of Economics.
    5. Ovidiu Stoica & Iulian Ihnatov, 2016. "Exchange Rate Regimes And External Financial Stability," Economic Annals, Faculty of Economics, University of Belgrade, vol. 61(209), pages 27-44, April - J.

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