Openness and the Cost of Relinquishing the Exchange Rate

F. Barry

Working Papers from College Dublin, Department of Political Economy-

Abstract: De Grauwe follows McKinnon in arguing that "for a very open economy the exchange rate is a particularly ineffective instrument." Since most countries are becoming more open this suggests that the exchange rate instrument is declining in importance. We identify a set of circumstances under which this argument is correct; our calibration model suggests however that in this case the argument is of little practical significance. Under an alternative set of circumstances however, openness not only enhances the output and employment effects of exchange rate changes, but does so significantly.

Keywords: EXCHANGE RATE; MONETARY UNION; EUROPE (search for similar items in EconPapers)
JEL-codes: F15 F31 F41 (search for similar items in EconPapers)
Pages: 17 pages
Date: 1998
References: Add references at CitEc
Citations: View citations in EconPapers (1)

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
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:fth:dublec:98/15

Access Statistics for this paper

More papers in Working Papers from College Dublin, Department of Political Economy- Ireland; University College Dublin, Department of Political Economy, Centre for Economic Research, Belfield, Dublin 4. Contact information at EDIRC.
Bibliographic data for series maintained by Thomas Krichel ().