Optimal and Time Consistent Exchange Rate Management in an Overlapping Generations Economy
This paper analyzes exchange rate management in a simple overlapping generations model. This framework is used to evaluate alternative policies in terms of their implications for the welfare of individuals in the economy.The analysis identifies two objectives of monetary policy,providing adesirable store of value and collecting seigniorage. When the chief concern is to provide a desirable store of value (as when the monetary authority's major constituency consists of the asset holders of the economy), a policy of fixing the exchange rate does better when shocks are primarily of domestic origin while floating becomes more desirable when foreign shocks predominate. When seigniorage concerns are paramount (as when the authority's constituency is the young generation) flexible rates do better.When seigniorage concernsare paramount and when the monetary authority cannot establish a reputation for conducting monetary policy in a way that makes the currency a desirable store of value, a national currency may not be viable in the absence of exchange controls. Such controls may be justified in this situation.
|Date of creation:||Aug 1983|
|Publication status:||published as Eaton, Jonathan. "Optimal and Time Consistent Exchange-Rate Management inan Overlapping-Generations Economy." Journal of International Money and Finance, Vol. 4, No. 1, (March 1985), pp. 83-100.|
|Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
Web page: http://www.nber.org
More information through EDIRC
References listed on IDEAS
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.:
- Jonathan Eaton & Stephen J. Turnovsky, 1984.
"The Forward Exchange Market, Speculation, and Exchange Market Intervention,"
The Quarterly Journal of Economics,
Oxford University Press, vol. 99(1), pages 45-69.
- Jonathan Eaton & Stephen J. Turnovsky, 1983. "The Forward Exchange Market, Speculation, and Exchange Market Intervention," NBER Working Papers 1138, National Bureau of Economic Research, Inc.
- Helpman, Elhanan & Razin, Assaf, 1978.
"Towards a consistent comparison of alternative exchange rate systems,"
Elsevier, vol. 1(1), pages 33-36.
- Elhanan Helpman & Assaf Razin, 1979. "Towards a Consistent Comparison of Alternative Exchange Rate Systems," Canadian Journal of Economics, Canadian Economics Association, vol. 12(3), pages 394-409, August.
- Helpman, Elhanan & Razin, Assaf, 1978. "Towards a consistent comparison of alternative exchange rate systems," Economics Letters, Elsevier, vol. 1(1), pages 77-80.
- Alan C. Stockman, 1978.
"A Theory of Exchange Rate Determination,"
UCLA Economics Working Papers
122, UCLA Department of Economics.
- Willem H. Buiter & Jonathan Eaton, 1980.
"Policy Decentralization and Exchange Rate Management in Interdependent Economies,"
NBER Working Papers
0531, National Bureau of Economic Research, Inc.
- Buiter, Willem H & Eaton, Jonathan, 1980. "Policy Decentralisation and Exchange Rate Management in Interdependent Economies," The Warwick Economics Research Paper Series (TWERPS) 172, University of Warwick, Department of Economics.
- Calvo, Guillermo A, 1978. "On the Time Consistency of Optimal Policy in a Monetary Economy," Econometrica, Econometric Society, vol. 46(6), pages 1411-1428, November.
- John Kareken & Neil Wallace, 1981. "On the Indeterminacy of Equilibrium Exchange Rates," The Quarterly Journal of Economics, Oxford University Press, vol. 96(2), pages 207-222.
- David A. Hsieh, 1982. "International Risk Sharing and the Choice of Exchange-Rate Regime," NBER Working Papers 0842, National Bureau of Economic Research, Inc.
- Kydland, Finn, 1977. "Equilibrium solutions in dynamic dominant-player models," Journal of Economic Theory, Elsevier, vol. 15(2), pages 307-324, August.
- Paul A. Samuelson, 1958. "An Exact Consumption-Loan Model of Interest with or without the Social Contrivance of Money," Journal of Political Economy, University of Chicago Press, vol. 66, pages 467-467.
- Aizenman, Joshua, 1981. "The use of the balance of payments as a shock absorber in fixed rate and managed float systems," Journal of International Economics, Elsevier, vol. 11(4), pages 479-486, November.
When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:1196. 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.