TY - JOUR
T1 - Aspects of the optimal management of exchange rates
AU - Frenkel, Jacob A.
AU - Aizenman, Joshua
N1 - Funding Information:
lPrevtous verston~ of thus paper were presented at i: ctrnlcrence cm the Choice of .m t:xcbxnge Rzllc System he!d iit the l~nivctsity of South Carohnr. May IWI. 3nrf ;)I ttw l‘ifth lnternatlonal Canf&xtce of the University of P~i~~a~ph~ne on Monev and Jntxnntional Monetary Problems, P;rris, June 1981. WC have benefited from useful comments by Robert Flood, Robert Hodrick, Maurice nhs&ld, Shulamit Pessach as weI! as participants m seminars held at Columbi? Ilmiver,..y ,~ar’i the International Monetary Fund. J.A. Frcnkel is indebted to the National Science Foundation, grant SES-7814480 AOE fw financral support The rewarch reported hew is par of rht-Nl?ER’s Research Progr;~m in Intc.rnationrtl Studw. Airy opinions are those Itf thr authors and not necessarily those of the NBER.
PY - 1982/1/1
Y1 - 1982/1/1
N2 - This paper shows that the choice of the optimal exchange-rate regime depends on the stochastic shocks affecting the economy. The higher the variance of real shocks, the larger the desirability of fixity of exchange rates. The desirability of exchange-rate flexibility increases the larger are the variances of the shocks to the demand for money, to the supply of money, to foreign prices, and to purchasing power parities. When the economy produces traded and non-traded goods the desirability of exchange-rate flexibility diminishes the higher is the relative share of non-traded goods and the lower are the elasticities of demand and supply of the two goods.
AB - This paper shows that the choice of the optimal exchange-rate regime depends on the stochastic shocks affecting the economy. The higher the variance of real shocks, the larger the desirability of fixity of exchange rates. The desirability of exchange-rate flexibility increases the larger are the variances of the shocks to the demand for money, to the supply of money, to foreign prices, and to purchasing power parities. When the economy produces traded and non-traded goods the desirability of exchange-rate flexibility diminishes the higher is the relative share of non-traded goods and the lower are the elasticities of demand and supply of the two goods.
UR - http://www.scopus.com/inward/record.url?scp=0000755642&partnerID=8YFLogxK
U2 - 10.1016/0022-1996(82)90056-3
DO - 10.1016/0022-1996(82)90056-3
M3 - Article
AN - SCOPUS:0000755642
SN - 0022-1996
VL - 13
SP - 231
EP - 256
JO - Journal of International Economics
JF - Journal of International Economics
IS - 3-4
ER -