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Exchange Rate Regimes and Macroeconomic Stability: The Case of Sweden 1972-1996

  • Bergvall, Anders

    ()

    (Department of Economics)

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    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.

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    Paper provided by Uppsala University, Department of Economics in its series Working Paper Series with number 2000:25.

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    Length: 25 pages
    Date of creation: 15 Dec 2000
    Date of revision:
    Publication status: Published in Oxford Economic papers-New series 57, 2005, pages 422-446.
    Handle: RePEc:hhs:uunewp:2000_025
    Contact details of provider: Postal: Department of Economics, Uppsala University, P. O. Box 513, SE-751 20 Uppsala, Sweden
    Phone: + 46 18 471 25 00
    Fax: + 46 18 471 14 78
    Web page: http://www.nek.uu.se/
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    1. Flood, Robert P. & Rose, Andrew K., 1995. "Fixing exchange rates A virtual quest for fundamentals," Journal of Monetary Economics, Elsevier, vol. 36(1), pages 3-37, August.
    2. Svensson, Lars E O, 1998. "Open-Economy Inflation Targeting," CEPR Discussion Papers 1989, C.E.P.R. Discussion Papers.
    3. William Poole, 1999. "Monetary policy rules?," Review, Federal Reserve Bank of St. Louis, issue Mar, pages 3-12.
    4. Alexius, Annika, 1999. "Sources of Real Exchange Rate Fluctuations in the Nordic Countries," Working Paper Series 90, Sveriges Riksbank (Central Bank of Sweden).
    5. Gottfries, N., 1999. "Market Shares, Financial Constraints, and Pricing Behavior in the Export Market," Papers 1999:15, Uppsala - Working Paper Series.
    6. Edin, Per-Anders & Vredin, Anders, 1993. "Devaluation Risk in Target Zones: Evidence from the Nordic Countries," Economic Journal, Royal Economic Society, vol. 103(416), pages 161-75, January.
    7. Olivier Jean Blanchard & Lawrence Katz, 1999. "Wage Dynamics: Reconciling Theory and Evidence," NBER Working Papers 6924, National Bureau of Economic Research, Inc.
    8. Maurice Obstfeld & Kenneth S. Rogoff, 1996. "Foundations of International Macroeconomics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262150476, June.
    9. Bergbom, L., 1998. "Exchange Rate Variability Inside and Outside the EMU," Papers 1998:26, Uppsala - Working Paper Series.
    10. Kenneth Rogoff, 1996. "The Purchasing Power Parity Puzzle," Journal of Economic Literature, American Economic Association, vol. 34(2), pages 647-668, June.
    11. Alun H. Thomas, 1997. "Is the Exchange Rate a Shock Absorber? the Case of Sweden," IMF Working Papers 97/176, International Monetary Fund.
    12. Bergbom, Lennart, 1998. "Exchange Rate Variability Inside and Outside the EMU," Working Paper Series 1998:26, Uppsala University, Department of Economics.
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