On the Relevance of Exchange Rate Regimes for Stabilization Policy

Isabel Correia (), Pedro Teles and Adão, Bernardino
Authors registered in the RePEc Author Service: Bernardino Adao ()

No 5797, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This paper assesses the relevance of the exchange rate regime for stabilization policy. This regime question cannot be dealt with independently of other institutions, in particular how fiscal policy is designed. We show that once fiscal policy is taken into account, the exchange rate regime is irrelevant. This is the case independently of the severity of price rigidities, independently of asymmetries across countries in shocks and transmission mechanisms and regardless of the incompleteness of international financial markets. The only relevant condition is labour mobility. The immobility of labour across countries is a necessary condition for our results.

Keywords: Monetary union; Fixed exchange rates; Fiscal and monetary policy; Stabilization policy; Labour mobility; Nominal rigidities (search for similar items in EconPapers)
JEL-codes: E31 E63 F20 F33 F41 F42 (search for similar items in EconPapers)
Date: 2006-08
New Economics Papers: this item is included in nep-cba, nep-ifn, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (17)

Downloads: (external link)
https://cepr.org/publications/DP5797 (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: On the relevance of exchange rate regimes for stabilization policy (2009)
Working Paper: On the Relevance of Exchange Rate Regimes for Stabilization Policy (2007)
Working Paper: On the Relevance of Exchange Rate Regimes for Stabilization Policy (2006)
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:5797

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP5797

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().