Activist Monetary Policy and Exchange Rate Overshooting: The Deutsche Mark/Dollar Rate

David Papell

No 1195, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: After a decade of generalized floating, it is clear that bilateral exchange rates exhibit more variability than the economic aggregates; relative prices, incomes, and money supplies, that generally comprise the fundamentals of theories of exchange rate determination. Dornbush's over-shooting hypothesis is the best known explanation of this phenomenon. This paper shows that accommodative monetary policy (with respect to prices) has the potential to cause the economy to switch from exchange rate overshooting to undershooting. Using constrained maximum likelihood methods, the model is estimated for Germany and the United States. The results provide strong evidence in support of the overshooting hypothesis for the Deutsche Mark/Dollar exchange rate.

Date: 1983-08
Note: ITI IFM
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Published as Papell, David H. "Activist Monetary Policy and Exchange Rate Overshooting: The Deutsche Mark/Dollar Rate." Journal of International Money and Finance, Vol. 3, No. 3, (December 1984), pp. 293-310.

Downloads: (external link)
http://www.nber.org/papers/w1195.pdf (application/pdf)

Related works:
Journal Article: Activist monetary policy and exchange-rate overshooting: The Deutsche mark/dollar rate (1984)
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:nbr:nberwo:1195

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w1195

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().