EconPapers    
Economics at your fingertips  
 

Macroeconomic Effects of Nominal Exchange Rate Regimes: New Insights into the Role of Price Dynamics

Robert Kollmann ()

No 4487, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This Paper analyses the effects of pegged and floating exchange rates using a two-country dynamic general equilibrium model that is calibrated to the US and a European aggregate. The model assumes shocks to money, productivity and the interest parity condition. It captures the fact that the sharp increase in nominal exchange rate volatility after the abandonment of the Bretton Woods (BW) system was accompanied by a commensurate rise in real exchange rate volatility, but had no pronounced effect on the volatility of US and European output. This holds irrespective of whether flexible or sticky prices are assumed – which casts doubt on the widespread view that the roughly equal rise in nominal and real exchange rate volatility reflects price stickiness. Flex-prices variants of the model capture better the fact that the correlation between US and European output has been higher in the floating-rate era.

Keywords: international macroeconomics; monetary economics (search for similar items in EconPapers)
JEL-codes: E40 F30 F40 (search for similar items in EconPapers)
Date: 2004-07
References: View references in EconPapers View complete reference list from CitEc
Citations View citations in EconPapers (3) Track citations by RSS feed

Downloads: (external link)
http://www.cepr.org/active/publications/discussion_papers/dp.php?dpno=4487 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
Journal Article: Macroeconomic effects of nominal exchange rate regimes: new insights into the role of price dynamics (2005) Downloads
Working Paper: Macroeconomic effects of nominal exchange rate regimes: new insights into the role of price dynamics (2005) Downloads
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:cpr:ceprdp:4487

Ordering information: This working paper can be ordered from
http://www.cepr.org/ ... ers/dp.php?dpno=4487

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 77 Bastwick Street, London EC1V 3PZ..
Series data maintained by (). This e-mail address is bad, please contact .

 
Page updated 2018-01-12
Handle: RePEc:cpr:ceprdp:4487