Managing Currency Pegs
The combination of a fixed exchange rate and downward nominal wage rigidity creates a real rigidity. In turn, this real rigidity makes the economy prone to involuntary unemployment during external crises. This paper presents a graphical analysis of alternative policy strategies aimed at mitigating this source of inefficiency. First- and second-best monetary and fiscal solutions are analyzed. Second-best solutions are found to be prudential, whereas first-best solutions are not.
|Date of creation:||May 2012|
|Date of revision:|
|Publication status:||published as “Managing Currency Pegs,” (with Mart´ın Uribe), American Economic Review: Papers & Pro- ceedings 102, May 2012, 192-197.|
|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
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.:
- Amartya Lahiri, 1996.
"Exchange Rate Based Stabilizations Under Real Frictions: The role of endagenous labor supply,"
UCLA Economics Working Papers
759, UCLA Department of Economics.
- Lahiri, Amartya, 2001. "Exchange rate based stabilizations under real frictions: The role of endogenous labor supply," Journal of Economic Dynamics and Control, Elsevier, vol. 25(8), pages 1157-1177, August.
- Calvo, Guillermo A, 1986. "Temporary Stabilization: Predetermined Exchange Rates," Journal of Political Economy, University of Chicago Press, vol. 94(6), pages 1319-29, December.
- Krugman, Paul, 1979. "A Model of Balance-of-Payments Crises," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 11(3), pages 311-25, August.
- Jorge E. RoldÃ³s, 1995. "Supply-Side Effects of Disinflation Programs," IMF Staff Papers, Palgrave Macmillan, vol. 42(1), pages 158-183, March.
When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:18092. 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.