 Exchange rate regimes and international business cyclesPost-Print from HAL Abstract: This paper investigates the impact of exchange rate regimes on international business cycles and focuses on the consequences of membership to the European Monetary System. The volatility puzzle uncovered by Baxter and Stockman [1989, Journal of Monetary Economics 23, 377-401] after assessing the consequences of the Bretton Woods system turns out to be a robust stylized fact: real and nominal exchange rates display a higher volatility under floating rates while the variability of macroeconomic quantities remains unchanged across exchange rate regimes. Besides, there is evidence that fixed rates are associated with enhanced comovement in output, consumption and investment. We find that a two-country model, featuring monopolistic competition, pricing-to-market, and price stickiness, captures all of the empirical features of the data but one; namely the stronger output comovement following the transition to fixed rates. © 2003 Elsevier Science (USA). All rights reserved. Keywords: Exchange rate regimes; Monopolistic competition; Price rigidities; Pricing-to-market (search for similar items in EconPapers) Published in Review of Economic Dynamics, 2003, 6 (2), pp.339--361. ⟨10.1016/S1094-2025(02)00017-0⟩ There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it. Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-02878011 DOI: 10.1016/S1094-2025(02)00017-0 Access Statistics for this paper More papers in Post-Print from HAL |
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