Adjustment to Monetary Policy and Devaluation Under Two-Tier and Fixed Exchange Rate Regimes
The purpose of this paper is to determine whether a two-tier exchange rate regime is more effective than a fixed rate regime in increasing acountry's ability to pursue an independent monetary policy in the short run.The analysis compares adjustment to a monetary policy and to a devaluation in the two exchange rate regimes in a portfolio model under imperfect asset substitutability. It is shown that the two policies have in the short run larger effects on interest rates under a two-tier regime. The duration of this effect, however, is longer under a fixed rate regime. The analysis is conducted for the case of static and rational expectations, demonstrating that the above results do not depend on the expectation mechanism.
|Date of creation:||Apr 1983|
|Date of revision:|
|Publication status:||published as Aizenman, Joshua. "Adjustment to Monetary Policy and Devaluation Under Two-Tier and Fixed Exchange Rate Regimes." Journal of Development Economics, Vol. 18, (1985), pp. 153-169.|
|Contact details of provider:|| Postal: |
Web page: http://www.nber.org
More information through EDIRC
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.:
- Flood, Robert P & Marion, Nancy Peregrim, 1982.
"The Transmission of Disturbances under Alternative Exchange-Rate Regimes with Optimal Indexing,"
The Quarterly Journal of Economics,
MIT Press, vol. 97(1), pages 43-66, February.
- Robert P. Flood & Nancy Peregrim Marion, 1980. "The Transmission of Disturbances under Alternative Exchange-Rate Regimeswith Optimal Indexing," NBER Working Papers 0500, National Bureau of Economic Research, Inc.
- Dornbusch, Rudiger, 1976.
" The Theory of Flexible Exchange Rate Regimes and Macroeconomic Policy,"
Scandinavian Journal of Economics,
Wiley Blackwell, vol. 78(2), pages 255-75.
- R. Dornbusch, 1975. "The Theory of Flexible Exchange Rate Regimes and Macroeconomic Policy," Working papers 165, Massachusetts Institute of Technology (MIT), Department of Economics.
- Kouri, Pentti J K & Porter, Michael G, 1974. "International Capital Flows and Portfolio Equilibrium," Journal of Political Economy, University of Chicago Press, vol. 82(3), pages 443-67, May/June.
- Frenkel, Jacob A & Rodriguez, Carlos Alfredo, 1975. "Portfolio Equilibrium and the Balance of Payments: A Monetary Approach," American Economic Review, American Economic Association, vol. 65(4), pages 674-88, September.
When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:1107. 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: ()
If references are entirely missing, you can add them using this form.