Exchange Rate Regimes and Macroeconomic Stability: The Case of Sweden 1972-1996
In this paper I investigate the relevance of the exchange rate regime for macroeconomic stability. I simulate hypothetical macroeconomic developments under different regimes in Sweden during the period 1972 -1996. 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 indicate that the central bank can stabilize much of the macroeconomic disturbances under a floating exchange rate, but still the volatility of the macroeconomic variables under the hypothetical floating exchange rate regime is about the same as under the actual quasi-fixed regime.
|Date of creation:||15 Dec 2000|
|Date of revision:|
|Publication status:||Published in Oxford Economic papers-New series 57, 2005, pages 422-446.|
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