Fiche du document
1 décembre 2021
- handle: 10670/1.wvqekn
Ce document est lié à :
10.22201/fe.01851667p.2021.318.8081
info:eu-repo/semantics/openAccess
Sujets proches
Kinetics Dynamical systemsCiter ce document
Franklin Serrano et al., « Exogenous interest rate and exchange rate dynamics under elastic expectations », Investigación económica, ID : 10670/1.wvqekn
Métriques
Partage / Export
Résumé
A theory analyzing the short run dynamics of nominal exchange rates under exogenous interest rates and free imperfect international capital markets is presented. Introducing elastic exchange rate expectations leads to cumulative changes in the spot and forward exchange rates in the same direction. We find that free floating exchange rate regimes are intrinsically unstable, as the nominal exchange rate is an institutional or policy variable that has no ‘fundamental equilibrium’ level. Implications for monetary policy and exchange market interventions of this potential instability are derived. Our results help to explain both the empirical prevalence of dirty floating exchange rate regimes and some aspects of the uncovered interest parity ‘failure’.