Dornbusch’s Overshooting Model After Twenty-Five Years

Kenneth Rogoff

No 2002/039, IMF Working Papers from International Monetary Fund

Abstract: This Mundell Fleming lecture at the International Monetary Fund’s 2001 annual research conference marks the 25th anniversary of Rudiger Dornbusch’s masterpiece, “Expectations and Exchange Rate Dynamics,” a seminal contribution to both policy and research in the field of international finance. This essay provides a simple overview of the model as well as some empirics, not only on exchange rates but on measures of the paper’s influence. Last, but not least, I offer some personal reflections on how Dornbusch conveyed the ideas in his “overshooting model” to inspire a generation of students.

Keywords: WP; exchange rate; money demand; forward rate; Overshooting; exchange rates; Dornbusch model; variant Dornbusch; overshooting paper; thought experiment; international economics; rational expectations reformulation; Real exchange rates; Demand for money; Monetary base; Sticky prices; Europe (search for similar items in EconPapers)
Pages: 41
Date: 2002-02-01
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Citations: View citations in EconPapers (30)

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