Does the Nominal Exchange Rate Regime Matter for Investment?
Hjalmar Böhm and
No 578, CESifo Working Paper Series from CESifo
This paper analyses the impact of exchange rate uncertainty upon the pattern of investment in different exchange rate regimes (very hard pegs, intermediate regimes, and floats) by means of a unified approach. The comparison of different exchange rate regimes indicates that currency volatility exerts only a small influence upon the level of investment spending. On the other hand, firms turn out to be more cautious about responding to exchange rate shocks in a credible target zone model than in a flexible exchange rate regime or in a target zone model with stochastic realignments.
Keywords: investment; uncertainty; irreversibility; exchange rate regimes (search for similar items in EconPapers)
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Working Paper: Does the Nominal Exchange Rate Regime Matter for Investment? (2001)
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_578
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