Adjustment to Monetary Policy and Devaluation Under Two-Tier and Fixed Exchange Rate Regimes / Joshua Aizenman.

Format:

Book

Author/Creator:

Aizenman, Joshua.

Contributor:

National Bureau of Economic Research.

Series:

Working Paper Series (National Bureau of Economic Research) no. w1107.

NBER working paper series no. w1107

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1983.

Summary:

The purpose of this paper is to determine whether a two-tier exchange rate regime is more effective than a fixed rate regime in increasing acountry's ability to pursue an independent monetary policy in the short run.The analysis compares adjustment to a monetary policy and to a devaluation in the two exchange rate regimes in a portfolio model under imperfect asset substitutability. It is shown that the two policies have in the short run larger effects on interest rates under a two-tier regime. The duration of this effect, however, is longer under a fixed rate regime. The analysis is conducted for the case of static and rational expectations, demonstrating that the above results do not depend on the expectation mechanism.

Notes:

Print version record

April 1983.