Abstract

http://ssrn.com/abstract=231636
 
 

References (14)



 
 

Citations (7)



 
 

Footnotes (9)



 


 



Real Exchange Rate Targeting and Macroeconomic Instability


Martin Uribe


Columbia University - Graduate School of Arts and Sciences - Department of Economics; National Bureau of Economic Research (NBER)

October 23, 2002


Abstract:     
Using an optimizing model of a small open economy, this paper studies the macroeconomic effects of PPP rules whereby the government increases the devaluation rate when the real exchange rate - defined as the price of tradables in terms of nontradables - is below its long-run level and reduces the devaluation rate when the real exchange rate is above its long-run level. The paper shows that the mere existence of such a rule can generate aggregate fluctuations due to self-fulfilling revisions in expectations. The result is shown to obtain in both flexible- and sticky-price environments.

Number of Pages in PDF File: 32

Keywords: real exchange rate targeting, sunspot equilibria, indeterminacy

JEL Classification: F41

working papers series





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Date posted: September 7, 2000  

Suggested Citation

Uribe, Martin, Real Exchange Rate Targeting and Macroeconomic Instability (October 23, 2002). Available at SSRN: http://ssrn.com/abstract=231636 or http://dx.doi.org/10.2139/ssrn.231636

Contact Information

Martin Uribe (Contact Author)
Columbia University - Graduate School of Arts and Sciences - Department of Economics ( email )
420 W. 118th Street
1022 International Affairs Building, MC 3308
New York, NY 10027
United States
212-851-4008 (Phone)
212-854-8059 (Fax)
National Bureau of Economic Research (NBER)
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Cambridge, MA 02138
United States
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References:  14
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