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Exchange Rate Appreciation As a Signal of a New Policy Stance

Author

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  • Mr. Georg Winckler

Abstract

It is shown in a game theoretic framework that it may pay off to signal a “conservative” policy stance--giving a high priority to price stability--by appreciating the exchange rate. Such an appreciation demonstrates to domestic producers and more precisely to the trade union that the new policy stance is meant to be serious. An example explores the welfare implication for the policy maker and the trade union. The empirical background of the paper refers to the monetary policy in Europe. It explains the occurrence of exchange rate commitments to the deutsche mark, with appreciated rates.

Suggested Citation

  • Mr. Georg Winckler, 1991. "Exchange Rate Appreciation As a Signal of a New Policy Stance," IMF Working Papers 1991/032, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:1991/032
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    Cited by:

    1. John A. Tatom, 1994. "Currency appreciation and \"deindustrialization\": a European perspective," Working Papers 1992-006, Federal Reserve Bank of St. Louis.
    2. Hochreiter, Eduard & Winckler, Georg, 1995. "The advantages of tying Austria's hands: The success of the hard currency strategy," European Journal of Political Economy, Elsevier, vol. 11(1), pages 83-111, March.
    3. John A. Tatom, 1995. "Currency Appreciation and ‘Deindustrialisation’: A European Perspective," The World Economy, Wiley Blackwell, vol. 18(4), pages 519-541, July.

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