Jeanne, Olivier; Rose, Andrew K. - In: The Quarterly Journal of Economics 117 (2002) 2, pp. 537-569
Policy-makers often justify their choice of fixed exchange rate regimes as a shelter against nonfundamental influences in the foreign exchange market. This paper proposes a framework, based on endogenous noise trading, which makes sense of the policy-makers' view. We show that as a result of...