How to avoid self-fulfilling crises

Virginie Boinet
Additional contact information
Virginie Boinet: Brunel University

No 33, Royal Economic Society Annual Conference 2002 from Royal Economic Society

Abstract: Obstfeld (1994) shows that, for the same level of economic fundamentals, it may be optimal for a government either to devalue or to maintain the peg. Multiple equilibria occur: it is the phenomenon of self-fulfilling crisis. To avoid this kind of crisis, this article offers a new proposal: a partial delegation of exchange rate policy to a more inflation-averse central banker. It shows that if the government continues to decide whether to maintain the peg while the central banker chooses the magnitude of any realignment, lower inflationary expectations will lead to the existence of only one equilibrium.

Date: 2002-08-29
New Economics Papers: this item is included in nep-ifn
References: Add references at CitEc
Citations:

Downloads: (external link)
http://repec.org/res2002/Boinet.pdf full text

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ecj:ac2002:33

Access Statistics for this paper

More papers in Royal Economic Society Annual Conference 2002 from Royal Economic Society Contact information at EDIRC.
Bibliographic data for series maintained by Christopher F. Baum ().