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Three Exchange Rate Regimes and a Monetary Union: Determinacy, Currency Crises, and Welfare

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Listed:
  • Carsten K. Nielsen

    (University of Copenhagen)

Abstract

We study three different exchange rate regimes in a stochastic OLG model with free capital mobility and incomplete markets. The regimes are characterized by the type of coordinated seignorage financed transfer (or fiscal) policy in place. We are especially interested in how the different types of policies affect the possibility of sunspot equilibria with real and/or nominal effects.

Suggested Citation

  • Carsten K. Nielsen, 2001. "Three Exchange Rate Regimes and a Monetary Union: Determinacy, Currency Crises, and Welfare," Working Papers 0104, Banco de España.
    • Handle: RePEc:bde:wpaper:0104
    as

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    References listed on IDEAS

    as
    1. Obstfeld, Maurice, 1996. "Models of currency crises with self-fulfilling features," European Economic Review, Elsevier, vol. 40(3-5), pages 1037-1047, April.
    2. Obstfeld, Maurice & Rogoff, Kenneth, 2000. "New directions for stochastic open economy models," Journal of International Economics, Elsevier, vol. 50(1), pages 117-153, February.
    3. Sarno,Lucio & Taylor,Mark P., 2003. "The Economics of Exchange Rates," Cambridge Books, Cambridge University Press, number 9780521485845, October.
    4. Cass, David & Shell, Karl, 1983. "Do Sunspots Matter?," Journal of Political Economy, University of Chicago Press, vol. 91(2), pages 193-227, April.
    5. Manuelli, Rodolfo E & Peck, James, 1990. "Exchange Rate Volatility in an Equilibrium Asset Pricing Model," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 31(3), pages 559-574, August.
    6. Azariadis, Costas, 1981. "Self-fulfilling prophecies," Journal of Economic Theory, Elsevier, vol. 25(3), pages 380-396, December.
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    More about this item

    Keywords

    exchange rate; central banks; currencies;
    All these keywords.

    JEL classification:

    • D52 - Microeconomics - - General Equilibrium and Disequilibrium - - - Incomplete Markets
    • D60 - Microeconomics - - Welfare Economics - - - General
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission

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