Domestic and Foreign Disturbances in an Optimizing Model of Exchange- Rate Determination / Stephen J. Turnovsky.

Format:

Book

Author/Creator:

Turnovsky, Stephen J.

Contributor:

National Bureau of Economic Research.

Series:

Working Paper Series (National Bureau of Economic Research) no. w1407.

NBER working paper series no. w1407

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1984.

Summary:

This paper analyzes the effects of various disturbances of domestic and foreign origin in a small open economy under imperfect capital mobility in which the behavioral relationships are derived from optimization by the private sector. In this model the domestic economy jumps instantaneously to its new equilibrium following a change in either the domestic monetary growth rate or domestic fiscal policy. In response to a disturbance in either the foreign interest rate or inflation rate,the economy undergoes an initial partial jump towards its new equilibrium,which it there after approaches gradually. The implications of these results for exchange rate adjustment and the insulation properties of flexible exchange rates are discussed.

Notes:

Print version record

July 1984.