Greed, impatience and exchange rate determination
|Title:||Greed, impatience and exchange rate determination||Authors:||Bohn, Frank||Permanent link:||http://hdl.handle.net/10197/1341||Date:||May-2006||Abstract:||This paper offers a theoretical explanation for the determination of exchange rates under specific conditions which can/could be found in some OECD and newly industrialised countries. In an Obstfeld (1994) framework extended to incorporate government expropriation reneging on a fixed exchange rate promise unambiguously produces short term benefits, but long term losses. The choice of exchange rate regime depends on the combined effect of greediness (expropriation) and impatience (political instability), though not straightforwardly. In particular, similarly stable countries may choose different exchange rate regimes due to different levels of rent-seeking, for instance Mexico and Chile in the 1980s.||Type of material:||Working Paper||Publisher:||University College Dublin. School of Economics||Keywords:||Exchange rate regime;Monetary policy;Fiscal policy;Expropriation;Political instability;Political economy||Subject LCSH:||Foreign exchange rates
|Language:||en||Status of Item:||Not peer reviewed|
|Appears in Collections:||Economics Working Papers & Policy Papers|
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