Exchange Rate Management: Intertemporal Tradoffs

Elhanan Helpman and Assaf Razin

No 1590, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: The management of the exchange rate is possible only if the government pursues a monetary-fiscal policy mix which is consistent with its exchange rate targets. In this paper with uncertainty concerning the length of individual life the real consequences of exchange rate management depend on the precise time pattern of the accompanying policies. We look at a stylized example of disinflation by means of exchange rate targetting with an initial overvalued currency and a delayed accompanying absorbtion policy. The result will be an intergenerational redistribution of welfare whereby spending rises during the initial period and falls during later periods, while the external debt rises in all periods.

Date: 1985-03
Note: ITI IFM
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Published as Helpman, Elhanan and Assaf Razin. "Exchange Rate Management: Intertempora Tradeoffs," American Economic Review, Vol. 77, No. 1, (March 1987), pp. 10 7-123.

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Related works:
Journal Article: Exchange Rate Management: Intertemporal Tradeoffs (1987)
Working Paper: Exchange Rate Management: Intertemporal Tradeoffs (1985)
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