Economics at your fingertips  

Currency portfolios and nominal exchange rates in a dual currency search economy

Ben Craig () and Christopher Waller ()

No 9916, Working Papers (Old Series) from Federal Reserve Bank of Cleveland

Abstract: The authors analyze a dual-currency search model in which agents may hold multiple units of both currencies. They study equilibria in which the two currencies are identical and equilibria in which the two currencies differ according to the magnitude of the \\"inflation tax\\" risk associated with each. When one currency has the right amount of risk, equilibria exist in which the safe currency trades for multiple units of the risky one (pure currency exchange). As a result, the steady state has a distribution of nominal exchange rates. The mean and variance of this distribution typically change in predictable ways when the fundamentals change.

Keywords: Foreign exchange; Money (search for similar items in EconPapers)
Date: 1999, Revised 1999
New Economics Papers: this item is included in nep-ifn and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7) Track citations by RSS feed

Downloads: (external link) ... ates%20pdf.pdf?la=en Full text (application/pdf)

Related works:
Working Paper: Currency Portfolios and Nominal Exchange Rates in a Dual Currency Search Economy (1999)
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:

Ordering information: This working paper can be ordered from

Access Statistics for this paper

More papers in Working Papers (Old Series) from Federal Reserve Bank of Cleveland Contact information at EDIRC.
Bibliographic data for series maintained by ().

Page updated 2020-07-05
Handle: RePEc:fip:fedcwp:9916