Activist Monetary Policy and Exchange Rate Overshooting: The Deutsche Mark/Dollar Rate / David H. Papell.

Format:

Book

Author/Creator:

Papell, David H.

Contributor:

National Bureau of Economic Research.

Series:

Working Paper Series (National Bureau of Economic Research) no. w1195.

NBER working paper series no. w1195

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Activist Monetary Policy and Exchange Rate Overshooting

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1983.

Summary:

After a decade of generalized floating, it is clear that bilateral exchange rates exhibit more variability than the economic aggregates; relative prices, incomes, and money supplies, that generally comprise the fundamentals of theories of exchange rate determination. Dornbush's over-shooting hypothesis is the best known explanation of this phenomenon. This paper shows that accommodative monetary policy (with respect to prices) has the potential to cause the economy to switch from exchange rate overshooting to undershooting. Using constrained maximum likelihood methods, the model is estimated for Germany and the United States. The results provide strong evidence in support of the overshooting hypothesis for the Deutsche Mark/Dollar exchange rate.

Notes:

Print version record

August 1983.