IDEAS home Printed from
MyIDEAS: Login to save this paper or follow this series

Experimental Evidence on the Benefits of Eliminating Exchange Rate Uncertainties and Why Expected Utility Theory causes Economists to Miss Them

  • Robin Pope


  • Reinhard Selten


  • Sebastian Kube


  • Jürgen von Hagen


Conclusions favourable to flexible exchange rates typically accord with expected utility theory in ignoring the costs that exchange rate uncertainty generates for governments, central banks, firms and unions in: (i) choosing among available acts; and (ii) existing until learning the outcome of the chosen act. Allowing for these costs involves the stages of knowledge ahead framework, Pope (1983, 1995, 2005). A laboratory experiment suggests that (i) and (ii) together outweigh the advantages of having a flexible exchange rate as an additional instrument for managing a country’s employment, interest rate, price level and international competitiveness goals

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
Download Restriction: no

Paper provided by University of Siena in its series Labsi Experimental Economics Laboratory University of Siena with number 010.

in new window

Date of creation: Oct 2006
Date of revision:
Handle: RePEc:usi:labsit:010
Contact details of provider: Postal: Piazza San Francesco 7, 53100 Siena
Web page:

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.:

as in new window
  1. Yin-Wong Cheung & Daniel Friedman, 2008. "Speculative Attacks: A Laboratory Study in Continuous Time," CESifo Working Paper Series 2420, CESifo Group Munich.
  2. Fisher, Eric O'N, 2001. "Purchasing Power Parity and Interest Parity in the Laboratory," Australian Economic Papers, Wiley Blackwell, vol. 40(4), pages 586-602, December.
  3. Maurice Obstfeld, 2003. "International Macroeconomics: Beyond the Mundell-Fleming Model," International Finance 0303006, EconWPA.
  4. Rose, Andrew K, 1999. "One Money, One Market: Estimating the Effect of Common Currencies on Trade," CEPR Discussion Papers 2329, C.E.P.R. Discussion Papers.
  5. Selten, Reinhard, . "Features of Experimentally Observed Bounded Rationality," Discussion Paper Serie B 421, University of Bonn, Germany, revised Nov 1997.
  6. Thomas J. Courchene, 1999. "Alternative North American Currency Arrangements: A Research Agenda," Canadian Public Policy, University of Toronto Press, vol. 25(3), pages 308-314, September.
  7. Peter B. Kenen, 2001. "International Financial Architecture: What's New? What's Missing?, The," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 335.
  8. Malin Adolfson, 1997. "Exchange rate pass-through to Swedish import prices," Finnish Economic Papers, Finnish Economic Association, vol. 10(2), pages 81-98, Autumn.
  9. Selten, Reinhard, 1996. "Aspiration Adaptation Theory," Discussion Paper Serie B 389, University of Bonn, Germany.
  10. von Hagen, Jürgen & Zhou, Jizhong, 2004. "The Choice of Exchange Rate Regime in Developing Countries: A Multinational Panel Analysis," CEPR Discussion Papers 4227, C.E.P.R. Discussion Papers.
  11. Dr Peter Kenen, 2002. "Currency Unions and Trade: Variations on Themes by Rose and Persson," Reserve Bank of New Zealand Discussion Paper Series DP2002/08, Reserve Bank of New Zealand.
  12. Eric Fisher, 2004. "Exploring Elements of Exchange Rate Theory in a Controlled Enivronment," Levine's Bibliography 122247000000000199, UCLA Department of Economics.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:usi:labsit:010. 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: (Alessandro Innocenti)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.