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A Model of Foreign Exchange Rate Indetermination / Charles Engel.
- Format:
- Book
- Author/Creator:
- Engel, Charles.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w5766.
- NBER working paper series no. w5766
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 1996.
- Summary:
- Economic agents undertake actions to protect themselves from the short-run impact of foreign exchange rate fluctuations: Nominal goods prices are set in consumers' currencies, and firms hedge foreign exchange risk. A model is presented here which shows that these features of the economy can lead to indeterminacy in the nominal exchange rate in the short run. There can be noise in the exchange rate, unrelated to any fundamentals, essentially because the short-run fluctuations do not influence any rational agent's behavior. Empirical implications of this sort of noise are explored.
- Notes:
- Print version record
- September 1996.
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