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 prudential, whereas first-best solutions are not.
Year of publication: |
2012
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Authors: | Schmitt-Grohe, Stephanie ; Uribe, Martin |
Published in: |
American Economic Review. - American Economic Association - AEA. - Vol. 102.2012, 3, p. 192-97
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Publisher: |
American Economic Association - AEA |
Saved in:
Online Resource
Saved in favorites
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