Pegs, Downward Wage Rigidity, and Unemployment: The Role of Financial Structure / 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. w18223.

NBER working paper series no. w18223

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2012.

Summary:

This paper studies the relationship between financial structure and the welfare consequences of fixed exchange rate regimes in small open emerging economies with downward nominal wage rigidity. The paper presents two surprising results. First, a pegging economy might be better off with a closed than with an open capital account. Second, the welfare gain from switching from a peg to the optimal (full-employment) monetary policy might be larger in financially open economies than in financially closed ones.

Notes:

Print version record

July 2012.