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Exchange Rate Policy in Small Rich Economies

We look at the exchange rate policy choices and outcomes for small rich economies. Small rich economies face significant policy challenges due to proportionately greater economic volatility than larger economies. These economies usually choose some form of fixed exchange rate regime, particularly in the very small economies where the per capita cost of independent monetary policy is relatively high. When such countries do choose a free or managed floating regime, they appear to derive no benefit from those regimes; their exchange rate volatility seems to rise without any significant change in fundamental economic volatility. Thus, for these countries, floating exchange rates seem to create problems for policy makers without solving any.

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Paper provided by Queen Mary University of London, School of Economics and Finance in its series Working Papers with number 684.

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Date of creation: Dec 2011
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Handle: RePEc:qmw:qmwecw:wp684
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  1. Furceri, Davide & Karras, Georgios, 2007. "Country size and business cycle volatility: Scale really matters," Journal of the Japanese and International Economies, Elsevier, vol. 21(4), pages 424-434, December.
  2. Patrick Imam, 2012. "Exchange Rate Choices of Microstates," The Developing Economies, Institute of Developing Economies, vol. 50(3), pages 207-235, 09.
  3. Reinhart, Carmen & Rogoff, Kenneth, 2004. "The modern history of exchange rate arrangements: A reinterpretation," MPRA Paper 14070, University Library of Munich, Germany.
  4. Krugman, Paul, 1980. "Scale Economies, Product Differentiation, and the Pattern of Trade," American Economic Review, American Economic Association, vol. 70(5), pages 950-59, December.
  5. Ventura, Jaume, 2005. "Global View of Economic Growth," CEPR Discussion Papers 5059, C.E.P.R. Discussion Papers.
  6. Artis, Michael J & Ehrmann, Michael, 2000. "The Exchange Rate - A Shock-Absorber or Source of Shocks? A Study of Four Open Economies," CEPR Discussion Papers 2550, C.E.P.R. Discussion Papers.
  7. Stockman, Alan C. & Stockman, Alan C., 1983. "Real exchange rates under alternative nominal exchange-rate systems," Journal of International Money and Finance, Elsevier, vol. 2(2), pages 147-166, August.
  8. Jaume Ventura, 2005. "A Global View of Economic Growth," Working Papers 203, Barcelona Graduate School of Economics.
  9. Aliber, Robert Z, 1976. " The Firm under Pegged and Floating Exchange Rates," Scandinavian Journal of Economics, Wiley Blackwell, vol. 78(2), pages 309-22.
  10. Robert J. Barro, 1995. "Inflation and Economic Growth," NBER Working Papers 5326, National Bureau of Economic Research, Inc.
  11. Devereux, Michael B. & Engel, Charles, 2002. "Exchange rate pass-through, exchange rate volatility, and exchange rate disconnect," Journal of Monetary Economics, Elsevier, vol. 49(5), pages 913-940, July.
  12. K. Farrant & G. Peersman, 2005. "Is the exchange rate a shock absorber or a source of shocks? New empirical evidence," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 05/285, Ghent University, Faculty of Economics and Business Administration.
  13. repec:tpr:qjecon:v:119:y:2004:i:1:p:300-351 is not listed on IDEAS
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