Fixing Exchange Rates: A Virtual Quest for Fundamentals

37 Pages Posted: 3 May 2004 Last revised: 26 Oct 2022

See all articles by Robert P. Flood

Robert P. Flood

International Monetary Fund (IMF) - Research Department; CENTRUM Business School; National Bureau of Economic Research (NBER)

Andrew Kenan Rose

University of California - Haas School of Business; NUS Business School; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Date Written: October 1993

Abstract

Fixed exchange rates are less volatile than floating rates. But the volatility of macroeconomic variables such as money and output does not change very much across exchange rate regimes. This suggests that exchange rate models based only on macroeconomic fundamentals are unlikely to be very successful. It also suggests that there is no clear tradeoff between reduced exchange rate volatility and macroeconomic stability.

Suggested Citation

Flood, Robert P. and Rose, Andrew Kenan and Rose, Andrew Kenan, Fixing Exchange Rates: A Virtual Quest for Fundamentals (October 1993). NBER Working Paper No. w4503, Available at SSRN: https://ssrn.com/abstract=226772

Robert P. Flood (Contact Author)

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