Abstract

http://ssrn.com/abstract=902571
 
 

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Are Valuation Effects Desirable from a Global Perspective?


Pierpaolo Benigno


New York University - Stern School of Business; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

May 2006

NBER Working Paper No. w12219

Abstract:     
Recent studies have emphasized the role of valuation effects due to exchange rate movements in easing the process of adjustment of the external balance of a country. This paper asks to what extent valuation effects are desirable from a global perspective as a mean to achieve an efficient allocation of resources. In a frictionless world, it is desirable to have large movements in prices and exchange rates. But once a small concern for price stability is introduced not only should prices be stabilized but also the response of the exchange rate should be muted. There is a minor role for valuation effects that depends both on the size and composition of assets and liabilities.

Number of Pages in PDF File: 47

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Date posted: July 17, 2006  

Suggested Citation

Benigno, Pierpaolo, Are Valuation Effects Desirable from a Global Perspective? (May 2006). NBER Working Paper No. w12219. Available at SSRN: http://ssrn.com/abstract=902571

Contact Information

Pierpaolo Benigno (Contact Author)
New York University - Stern School of Business ( email )
269 Mercer Street
New York, NY 10003
United States
212-998-8958 (Phone)
212-995-4186 (Fax)
HOME PAGE: http://homepages.nyu.edu/~pb50
Centre for Economic Policy Research (CEPR)
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
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