Managing Currency Pegs

The combination of a fixed exchange rate and downward nominal wage rigidity creates a real rigidity. In turn, this real rigidity makes the economy prone to involuntary unemployment during external crises. This paper presents a graphical analysis of alternative policy strategies aimed at mitigating this source of inefficiency. First- and second-best monetary and fiscal solutions are analyzed. Second-best solutions are found to be prudential, whereas first-best solutions are not.

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Year of publication:	2012-05
Authors:	Schmitt-Grohé, Stephanie Schmitt-Grohe ; Uribe, Martín
Institutions:	National Bureau of Economic Research (NBER)

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Extent:	application/pdf
Series:	NBER Working Papers.
Type of publication:	Book / Working Paper
Notes:	IFM published as “Managing Currency Pegs,” (with Mart´ın Uribe), American Economic Review: Papers & Pro- ceedings 102, May 2012, 192-197. Number 18092
Classification:	F41 - Open Economy Macroeconomics
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10011271391