IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this article

Risk Aversion, Business Volatility and Exchange Rate Regimes in Small Open Economies

  • Cristian Pardo

    (Department of Economics, Saint Joseph's University, 5600 City Avenue, Philadelphia, PA 19131, USA)

This paper explores the effect of asymmetric information and entrepreneurial risk aversion on the dynamics of a small open economy. A private equity premium arises from the optimal contract between a domestic risk-averse borrower and a foreign lender, which, in general equilibrium, helps magnify the effect of shocks over time. In terms of an exchange rate regime comparison, when entrepreneurial risk aversion is considered, shocks are significantly more amplified under fixed than under flexible exchange rates. This result stems from the direct impact of deflation on real wages, which more strongly affects entrepreneur's wealth and hence the private equity premium.

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.palgrave-journals.com/eej/journal/v38/n2/pdf/eej201066a.pdf
File Function: Link to full text PDF
Download Restriction: Access to full text is restricted to subscribers.

File URL: http://www.palgrave-journals.com/eej/journal/v38/n2/full/eej201066a.html
File Function: Link to full text HTML
Download Restriction: Access to full text is restricted to subscribers.

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Article provided by Palgrave Macmillan & Eastern Economic Association in its journal Eastern Economic Journal.

Volume (Year): 38 (2012)
Issue (Month): 2 ()
Pages: 167-188

as
in new window

Handle: RePEc:pal:easeco:v:38:y:2012:i:2:p:167-188
Contact details of provider: Web page: http://www.palgrave-journals.com/

Postal:

c/o Dr. Alexandre Olbrecht, The Anisfield School of Business 205, Ramapo College, 505 Ramapo Valley Road, Ramapo, New Jersey 07430, USA

Phone: (201) 684-7346
Web page: https://www.qu.edu/eea/
Email:


More information through EDIRC

Order Information: Web: http://www.springer.com/economics/journal/41302

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. David K. Backus & Patrick J. Kehoe, 1992. "International Evidence on the Historical Properties of Business Cycles," Working Papers 92-5, New York University, Leonard N. Stern School of Business, Department of Economics.
  2. Reinhart, Carmen & Calvo, Guillermo, 2000. "When Capital Inflows Come to a Sudden Stop: Consequences and Policy Options," MPRA Paper 6982, University Library of Munich, Germany.
  3. Mark Gertler & Simon Gilchrist & Fabio Natalucci, 2003. "External Constraints on Monetary Policy and the Financial Accelerator," NBER Working Papers 10128, National Bureau of Economic Research, Inc.
  4. Calvo, Guillermo A., 1983. "Staggered prices in a utility-maximizing framework," Journal of Monetary Economics, Elsevier, vol. 12(3), pages 383-398, September.
Full references (including those not matched with items on IDEAS)

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

When requesting a correction, please mention this item's handle: RePEc:pal:easeco:v:38:y:2012:i:2:p:167-188. 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: (Sonal Shukla)

or (Rebekah McClure)

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.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.