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Exchange Rate Management: Intertemporal Tradeoffs

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  • Helpman, Elhanan
  • Razin, Assaf

Abstract

The management of the exchange rate is possible only if the government pursues a monetary-fiscal policy mix which is consistent with its exchange rate targets. In this paper with uncertainty concerning the length of individual life the real consequences of exchange rate management depend on the precise time pattern of the accompanying policies. We look at a stylized example of disinflation by means of exchange rate targetting with an initial overvalued currency and a delayed accompanying absorbtion policy. The result will be an intergenerational redistribution of welfare whereby spending rises during the initial period and falls during later periods, while the external debt rises in all periods.
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Suggested Citation

  • Helpman, Elhanan & Razin, Assaf, 1985. "Exchange Rate Management: Intertemporal Tradeoffs," Foerder Institute for Economic Research Working Papers 275397, Tel-Aviv University > Foerder Institute for Economic Research.
  • Handle: RePEc:ags:isfiwp:275397
    DOI: 10.22004/ag.econ.275397
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    References listed on IDEAS

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