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Multiple Reserve Requirements, Exchange Rates, Sudden Stops and Equilibrium Dynamics in a Small Open Economy

Grace Wang and Paula Hernandez-Verme ()

MPRA Paper from University Library of Munich, Germany

Abstract: We model a typical Asian-crisis-economy using dynamic general equilibrium techniques. Meaningful exchange rates obtain from nontrivial demands for fiat currencies. Sudden stops/bank-panics are possible, and key for evaluating the relative merits of alternative exchange rate regimes in promoting stability. Strategic complementarities contribute to the severe indeterminacy of the continuum of equilibria; there is a strong association between the scope for existence and indeterminacy of equilibria, the properties along dynamic paths and the underlying policy regime. Binding multiple reserve requirements reduce the scope for financial fragility and panic equilibria; backing the money supply acts as a stabilizer only in fixed regimes.

Keywords: Sudden stops; Exchange rate regimes; Multiple reserve requirements (search for similar items in EconPapers)
JEL-codes: E31 E44 F41 (search for similar items in EconPapers)
Date: 2009-03-05
New Economics Papers: this item is included in nep-dge, nep-ifn, nep-mac, nep-mon, nep-opm and nep-sea
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https://mpra.ub.uni-muenchen.de/13802/1/MPRA_paper_13802.pdf original version (application/pdf)

Related works:
Working Paper: Multiple Reserve Requirements, Exchange Rates, Sudden Stops and Equilibrium Dynamics in a Small Open Economy (2009) Downloads
Working Paper: Multiple Reserve Requirements, Exchange Rates, Sudden Stops and Equilibrium Dynamics in a Small Open Economy (2009) Downloads
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