Effects of U.S. Monetary Restraint on the DM-$ Exchange Rate and the German Economy
This paper assesses the quantitative effects of a shift to monetary restraint in the United States on the DM-$ exchange rate and the German economy. The results indicate that such effects are large. If Germany keeps its money growth unchanged, it will tend to experience a sharp and sustained depreciation of the deutsche mark and a significant increase in inflation and in unemployment. If it adopts an equivalent policy of monetary restraint, it will tend to benefit from a marked decline in inflation, but the cost in terms of lost output is extremely large.
|Date of creation:||Jul 1982|
|Date of revision:|
|Publication status:||published as Artus, Jacques R. "Effects of U.S. Monetary Restraint on the DM-$ Exchange Rate and the Germany Economy." Exchange Rate Theory and Practice, ed. by John F. O. Bilson and Richard C. Marston. Chicago UCP. (1984).|
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