The Real Exchange Rate as a Tool of Commercial Policy / Michael Mussa.

Format:

Book

Author/Creator:

Mussa, Michael.

Contributor:

National Bureau of Economic Research.

Series:

Working Paper Series (National Bureau of Economic Research) no. w1577.

NBER working paper series no. w1577

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1985.

Summary:

This paper develops a dynamic, rational expectations model that generalizes both the standard, two-country, two-commodity model of real trade theory and the "dependent economy" model of open economy macroeconomics. This model is used to show how a variety of government policies can affect the real exchange rate (defined as the relative price of domestic goods in terms of foreign goods) and thereby replicate some of the effects of commercial policy. The policies considered include temporary and expected future shifts in the distribution of government spending, temporary general tax reductions financed by the issuance of government debt, controls on international capital movements, and policies that combine a fixed path of the nominal exchange rate and a fixed path of the nominal money supply (supported by sterilized official intervention in the foreign exchange market).

Notes:

Print version record

March 1985.