English, Article, Journal or magazine article edition: Beggar Thy Neighbour Exchange Rate Regime Misadvice  from Misapplications of Mundell (1961) and the Remedy Robin Pope

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Physical Description
  • preprint
Language
  • English

Edition details

Title
  • Beggar Thy Neighbour Exchange Rate Regime Misadvice  from Misapplications of Mundell (1961) and the Remedy
Author
  • Robin Pope
Physical Description
  • preprint
Notes
  • Economists invoke Mundell (1961) in arguing for the general policy of   a flexible exchange rate regime as a means of restoring equilibria   after shocks. But there is a discrepancy between the intent of the   general policy and attempts at its implementation as identified by   specific changes in exchange rates.  When we assemble the set of   specific changes called for by distinct economists operating as   advocates for individual countries, these are uniformly in the form   of beggar-thy-neighbour advice – ie travesties of objectively   identifying disequilibria and a menace to international cooperation   and peace.  This paper traces the unintended travesties to problems   of complexity and uncertainty, problems that implicitly are assumed   absent in Mundell (1961) rendering the situation so simple that   equilibria are transparent.  The problems remained essentially   unaddressed when economists extended Mundell (1961) via expected   utility theory since this theory also ignores the impossibility of   maximising and the complexities of central bankers, private firms and   others in doing the evaluation stage in reaching decisions.  The   problems can be overcome by modelling within SKAT, the Stages of   Knowledge Ahead Theory.  This paper points to experimental evidence   in support of the view that under all sorts of disequilibrating   shocks, currency unions outperform flexible currencies by eliminating   the inefficiencies generated by exchange rate uncertainty.
  • optimal currency area; exchange rate regime; certainty effects;   policy; beggar-thy-neighbour; SKAT the Stages of Knowledge Ahead Theory; complexity; equilibrium; small world; shocks; expenditure-switching shocks; supply-side shocks; demand shocks; experiment, safety, international competitiveness.
  • RePEc:bon:bonedp:bgse1_2007
Language
  • English
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