Real Exchange Rate Variability under Pegged and Floating Nominal Exchange Rate Systems: An Equilibrium Theory / Alan C. Stockman.

Format:

Book

Author/Creator:

Stockman, Alan C.

Contributor:

National Bureau of Economic Research.

Series:

Working Paper Series (National Bureau of Economic Research) no. w2565.

NBER working paper series no. w2565

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Real Exchange Rate Variability under Pegged and Floating Nominal Exchange Rate Systems

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1988.

Summary:

This paper proposes a new explanation for the greater variability of real exchange rates under pegged than under floating nominal exchange rate systems. The explanation hinges on the propensity of governments to use international trade restrictions and financial restrictions for balance-of-payments purposes under pegged exchange rates. In particular. these restrictions become more likely during periods of time when countries suffer losses of international reserves than might. without policy changes. lead to a balance-of-payments crisis. This covariation of restrictions with reserve changes implies that real exchange rates will vary less under pegged than under floating exchange rates.

Notes:

Print version record

April 1988.