Exchange Rate Management: Intertemporal Tradoffs
26 Pages Posted: 23 Apr 2004 Last revised: 8 May 2022
Date Written: March 1985
Abstract
The management of the exchange rate is possible only if the government pursues a monetary-fiscal policy mix which is consistent with its exchange rate targets. In this paper with uncertainty concerning the length of individual life the real consequences of exchange rate management depend on the precise time pattern of the accompanying policies. We look at a stylized example of disinflation by means of exchange rate targetting with an initial overvalued currency and a delayed accompanying absorbtion policy. The result will be an intergenerational redistribution of welfare whereby spending rises during the initial period and falls during later periods, while the external debt rises in all periods.
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
Fiscal Policies and Real Exchange Rates in the World Economy
By Jacob A. Frenkel and Assaf Razin
-
Monetary and Fiscal Policies in an Open Economy
By Jacob A. Frenkel and Michael L. Mussa
-
The International Transmission of Fiscal Expenditures and Budget Deficits in the World Economy
By Jacob A. Frenkel and Assaf Razin
-
The International Transmission and Effects of Fiscal Policies
By Jacob A. Frenkel and Assaf Razin
-
Fiscal Policies, Debt, and International Economic Interdependence
By Jacob A. Frenkel and Assaf Razin
-
Recent U.S. Investment Behavior and the Tax Reform Act of 1986: A Disaggregate View
By Alan J. Auerbach and Kevin A. Hassett
-
Structural and Stabilization Aspects of Fiscal and Financial Policy in the Dependent Economy
-
By Ben Hunt, Paul Conway, ...
-
International Effects of Tax Reforms
By Jacob A. Frenkel and Assaf Razin