English, Article, Journal or magazine article edition: Endogenous Exchange Rate Regime Switches Gabriel de Kock; Vittorio Grilli

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Bookmark: http://trove.nla.gov.au/version/141662
Physical Description
  • preprint
Language
  • English

Edition details

Title
  • Endogenous Exchange Rate Regime Switches
Author
  • Gabriel de Kock
  • Vittorio Grilli
Physical Description
  • preprint
Notes
  • In this paper we demonstrate that exchange rate regime switching is compatible with optimal government policies. Nominal exchange-rate regimes are formalized as equilibrium commitments on future seigniorage policies, and the collapse of an exchange-rate peg as an excusable default which allows the government to lump-sum tax private sector money holdings. We demonstrate that a regime in which the exchange-rate peg is allowed to collapse when government spending is unusually high is a trigger-strategy equilibrium. Such a regime can be superior to both fixed and flexible exchange rate because it combines some of the flexibility of the floating exchange rates with some of the benefits of precommitment afforded by fixed rates.
  • RePEc:nbr:nberwo:3066
Language
  • English
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