The Role of Exchange Rate Movements in Transmitting International Disturbances

29 Pages Posted: 15 Feb 2006

See all articles by James M. Boughton

James M. Boughton

International Monetary Fund (IMF) - Policy Development and Review Department; National Bureau of Economic Research (NBER)

Richard Haas

affiliation not provided to SSRN

Paul R. Masson

International Monetary Fund (IMF) - Research Department; The Brookings Institution

Date Written: September 23, 1986

Abstract

This study reviews the theory of how exchange rate movements affect the transmission across industrial countries of monetary and fiscal policies and of shifts in portfolio preferences. It argues that questions such as whether policies are transmitted positively or negatively under floating rates and whether effects are greater or smaller than when exchange rate movements are offset cannot be determined a priori. The paper reviews the evidence on such effects from large econometric models and presents simulations with a small two-country model. It concludes that the effects predicted by the Mundell-Fleming model do not apply consistently in practice.

Suggested Citation

Boughton, James and Haas, Richard and Masson, Paul R., The Role of Exchange Rate Movements in Transmitting International Disturbances (September 23, 1986). IMF Working Paper No. 86/4, Available at SSRN: https://ssrn.com/abstract=884524

James Boughton (Contact Author)

International Monetary Fund (IMF) - Policy Development and Review Department ( email )

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National Bureau of Economic Research (NBER)

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Richard Haas

affiliation not provided to SSRN

No Address Available

Paul R. Masson

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

700 19th Street NW
Washington, DC 20431
United States

The Brookings Institution ( email )

1775 Massachusetts Ave. NW
Washington, DC 20036-2188
United States
202-797-6278 (Phone)
202-797-2968 (Fax)

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