Does the Nominal Exchange Rate Regime Matter for Investment?

Hjalmar Böhm () and Michael Funke

Quantitative Macroeconomics Working Papers from Hamburg University, Department of Economics

Abstract: This paper analyses the impact of exchange rate unertainty 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 realignment.

Keywords: Investment; Uncertainty; Irreversibility; Exchange Rate Regimes (search for similar items in EconPapers)
JEL-codes: D81 E22 F31 (search for similar items in EconPapers)
Date: 2001-05
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Citations: View citations in EconPapers (11)

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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:ham:qmwops:20105

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