Currency Management and Economic Stability
This paper considers the effects of an increase in the foreign interest rate on a small open economy with indexed wages and sticky prices. It is shown that currency market interventions helps reduce fluctuations in inflation and unemployment, as well as the exchange rate. Complete insulation, however, requires intervention both in the good and asset markets.
Year of publication: |
1981
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Authors: | Djajic, Slobodan |
Institutions: | Economics Department, Queen's University |
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