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- handle: 10670/1.xra9ew
- hal: hal-03391932
- doi: 10.3982/TE2669
- SCIENCESPO: 2441/425hdq96dn97t84knejpafl2p7
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Mots-clés
Currency appreciation Capital flows Global games C - Mathematical and Quantitative Methods/C.C7 - Game Theory and Bargaining Theory E - Macroeconomics and Monetary Economics/E.E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit F - International Economics/F.F4 - Macroeconomic Aspects of International Trade and FinanceSujets proches
Fixed exchange rates Exchange rates Fluctuating exchange rates Flexible exchange rates Rates of exchange Foreign exchange--Rates Floating exchange rates Specie Monetary question Money, Primitive Currency Standard of value Capital assets Fixed assetsCiter ce document
Guillaume Plantin et al., « Exchange Rates and Monetary Spillovers », Archive ouverte de Sciences Po (SPIRE), ID : 10.3982/TE2669
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Résumé
When do flexible exchange rates prevent monetary and financial conditions from spilling over across currencies? We examine a model in which international investors strategically supply capital to a small inflation‐targeting economy with flexible exchange rates. For some combination of parameters, the unique equilibrium exhibits the observed empirical feature of prolonged episodes of capital inflows and appreciation of the domestic currency, followed by reversals where capital outflows go hand‐in‐hand with currency depreciation, a rise in domestic interest rates, and inflationary pressure. Arbitrarily small shocks to global financial conditions suffice to trigger these dynamics.