Real Aspects of Exchange Rate Regime Choice with Collapsing Fixed Rates

39 Pages Posted: 28 Jun 2004

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)

Robert J. Hodrick

Columbia Business School - Finance and Economics; National Bureau of Economic Research (NBER)

Date Written: April 1985

Abstract

Typical evaluations of the choice of exchange rate regime employ a criterion function that depends on the real performance of the economy, and they focus on regimes that are expected to last indefinitely. This latter feature is strongly contradicted by the transitory nature of actual regimes.This paper extends the recent literature on collapses of fixed exchange rate regimes with exogenous real sectors to examine how the predictions of two popular models for the determination of some real economic variables must be modified when agents rationally perceive that the fixed rate regime will be transitory. The models studied are simple stochastic versions of the models in Dornbusch (1976) and Flood and Marion (1982).

Suggested Citation

Flood, Robert P. and Hodrick, Robert J., Real Aspects of Exchange Rate Regime Choice with Collapsing Fixed Rates (April 1985). NBER Working Paper No. w1603. Available at SSRN: https://ssrn.com/abstract=327141

Robert P. Flood (Contact Author)

International Monetary Fund (IMF) - Research Department ( email )

700 19th Street NW
Washington, DC 20431
United States
202-623-7667 (Phone)
202-623-6339 (Fax)

CENTRUM Business School

Daniel Alomía Robles s/n
Los Alamos de Monterrico
Surco, Lima, Lima 00001
Peru

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Robert J. Hodrick

Columbia Business School - Finance and Economics ( email )

3022 Broadway
New York, NY 10027
United States

National Bureau of Economic Research (NBER)

365 Fifth Avenue, 5th Floor
New York, NY 10016-4309
United States

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
26
Abstract Views
834
PlumX Metrics