Optimal and Time Consistent Exchange Rate Management in an Overlapping Generations Economy

Jonathan Eaton

No 1196, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper analyzes exchange rate management in a simple overlapping generations model. This framework is used to evaluate alternative policies in terms of their implications for the welfare of individuals in the economy.The analysis identifies two objectives of monetary policy,providing adesirable store of value and collecting seigniorage. When the chief concern is to provide a desirable store of value (as when the monetary authority's major constituency consists of the asset holders of the economy), a policy of fixing the exchange rate does better when shocks are primarily of domestic origin while floating becomes more desirable when foreign shocks predominate. When seigniorage concerns are paramount (as when the authority's constituency is the young generation) flexible rates do better.When seigniorage concernsare paramount and when the monetary authority cannot establish a reputation for conducting monetary policy in a way that makes the currency a desirable store of value, a national currency may not be viable in the absence of exchange controls. Such controls may be justified in this situation.

Date: 1983-08
Note: ITI IFM
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Published as Eaton, Jonathan. "Optimal and Time Consistent Exchange-Rate Management inan Overlapping-Generations Economy." Journal of International Money and Finance, Vol. 4, No. 1, (March 1985), pp. 83-100.

Downloads: (external link)
http://www.nber.org/papers/w1196.pdf (application/pdf)

Related works:
Journal Article: Optimal and time consistent exchange-rate management in an overlapping-generations economy (1985)
Working Paper: Optimal and Time Consistent Exchange Rate Management in an Overlapping Generations Economy (1982)
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:1196

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w1196

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 ().