Collapsing Exchange Rate Regimes: A Reinterpretation
نویسنده
چکیده
Microfoundations are provided for a common model of balance of payments crises by showing formal equivalence to a standard overlapping generations model. Certain domestic policy rules are inconsistent with fixed exchange rate equilibrium, which is in agreement with previous results. However, when policy is consistent with a fixed exchange rate equilibrium (1) there are multiple stationary equilibria, and the fixed exchange rate equilibrium is generally unstable under rational expectations; (2) the fixed exchange rate equilibrium is the attractor when agents learn over time; (3) complicated exchange rate paths cannot be ruled out by utility maxirnazation and rational expectations alone. James Bullard Research Officer Federal Reserve Bank of St. Louis 411 Locust Street St. Louis, MO 63102 Phone (314) 444-8576 Fax: (314) 444-8731
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