Managing Currency Pegs / Stephanie Schmitt-Grohé, Martín Uribe.

Format:

Book

Author/Creator:

Schmitt-Grohé, Stephanie.

Contributor:

National Bureau of Economic Research.

Uribe, Martín.

Series:

Working Paper Series (National Bureau of Economic Research) no. w18092.

NBER working paper series no. w18092

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2012.

Summary:

The combination of a fixed exchange rate and downward nominal wage rigidity creates a real rigidity. In turn, this real rigidity makes the economy prone to involuntary unemployment during external crises. This paper presents a graphical analysis of alternative policy strategies aimed at mitigating this source of inefficiency. First- and second-best monetary and fiscal solutions are analyzed. Second-best solutions are found to be prudential, whereas first-best solutions are not.

Notes:

Print version record

May 2012.