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Sticky Exchange Rates and Flexible Prices A Heretic View From the Interwar Period

Real exchange rate variability tends to be higher under flexible than under fixed exchange rates. The neokeynesian view attributes the higher variability to the combination of volatile nominal exchange rates with sticky prices. The neoclassical approach regards an increased incidence of real shocks...

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Bibliographic Details
Main Author: Gulde, Anne
Other Authors: Wolf, Holger
Format: eBook
Language:English
Published: Washington, D.C. International Monetary Fund 1991
Series:IMF Working Papers
Subjects:
Inflation
Exchange Rate Arrangements
International Monetary Arrangements And Institutions
Currency; Foreign Exchange
Deflation
Gold
Investments: Metals
Metals And Metal Products
Cement
Glass
Commodities
Foreign Exchange
Price Level
Ceramics
Exchange Rate Flexibility
Real Exchange Rates
Investment & Securities
Exchange Rates
United Kingdom
Online Access:
Collection: International Monetary Fund - Collection details see MPG.ReNa
Description
Summary:Real exchange rate variability tends to be higher under flexible than under fixed exchange rates. The neokeynesian view attributes the higher variability to the combination of volatile nominal exchange rates with sticky prices. The neoclassical approach regards an increased incidence of real shocks as the culprit. We test the crucial assumptions underlying the two models for the interwar period. Prices and exchange rates are found to be equally flexible. We hence reject the neokeynesian sticky price view for our sample period. In contrast, our results are consistent with, while not constituting evidence for, the neoclassical equilibrium approach
Physical Description:74 pages
ISBN:9781451937855

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