The Persistence of Unemployment Under a Fixed Exchange Rate Peg
This paper studies the dynamics of unemployment under a fixed exchange rate peg with an escape clause. The interesting aspects of these dynamics come from the interaction between unemployment and the devaluation expectations. While an increase in the unemployment rate raises the devaluation expectations, reciprocally the latter influence the unemployment rate through the level of interest rates. We present a model in which this interaction tends to increase the level and the persistence of unemployment, and can even generate some hysteresis in the unemployment dynamics that is associated with a currency crisis. The estimation of the model in the case of the French franc sheds new light on the franc crisis of 1992-93, as well as the franc fort policy and the convergence criteria of the Maastricht Treaty.
To our knowledge, this item is not available for
download. To find whether it is available, there are three
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.
|Date of creation:||01 Jul 1997|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://www.haas.berkeley.edu/groups/iber/wps/ciderwp.htm
More information through EDIRC
|Order Information:|| Postal: IBER, F502 Haas Building, University of California at Berkeley, Berkeley CA 94720-1922|
When requesting a correction, please mention this item's handle: RePEc:ucb:calbcd:c97-093. 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: (Christopher F. Baum)
If references are entirely missing, you can add them using this form.