On the Relevance of Exchange Rate Regimes for Stabilization Policy

Bernardino Adao (), Pedro Teles and Isabel Correia ()

Working Papers from Banco de Portugal, Economics and Research Department

Abstract: This paper assesses the relevance of the exchange rate regime for stabilization policy. This regime question cannot be dealt with independently of other institutions, in particular how .fiscal policy is designed. We show that once .fiscal policy is taken into account, the exchange rate regime is irrelevant. This is the case independently of the severity of price rigidities, independently of asymmetries across countries in shocks and transmission mechanisms and regardless of the incompleteness of international .financial markets. The only relevant condition is labor mobility. The imobility of labor across countries is a necessary condition for our results.

JEL-codes: E31 E63 F20 F33 F41 F42 (search for similar items in EconPapers)
Date: 2006
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Citations: View citations in EconPapers (21)

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Related works:
Journal Article: On the relevance of exchange rate regimes for stabilization policy (2009)
Working Paper: On the Relevance of Exchange Rate Regimes for Stabilization Policy (2007)
Working Paper: On the Relevance of Exchange Rate Regimes for Stabilization Policy (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:ptu:wpaper:w200616

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