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Creator: Chin, Daniel M. and Miller, Preston J. Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 194 Abstract:
In this study we contrast fixed and floating exchange rate regimes in a dynamic general equilibrium model. We find that the fundamental difference in the regimes is in the courses they imply for monetary policies. Because of policy coordination requirements, a tighter monetary policy needed to maintain a fixed exchange rate may necessitate a tightening in budget policy as well. We show that under some initial conditions voters or a social planner will favor one regime, but under other conditions they will favor the other. However, the choices of voters and a social planner are almost diametrically opposed.
Palabra clave: Monetary policy, Dynamic general equilibrium, and Exchange rate regimes Tema: E50 - Monetary Policy, Central Banking, and the Supply of Money and Credit: General, F41 - Open Economy Macroeconomics, and C60 - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling: General