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Fiscal Policy and the Predictability of Exchange Rate Collapse

It is well known that the long-run viability of a fixed exchange rate regime imposes constraints on monetary policy. This paper shows that, in a model with forward-looking agents, short-run viability imposes a fiscal constraint. When policy change, which destroys long-run viability, also violates th...

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Bibliographic Details
Main Author: Daniel, Betty
Format: eBook
Language:English
Published: Washington, D.C. International Monetary Fund 1997
Series:IMF Working Papers
Subjects:
Monetary Economics
Monetary Policy, Central Banking, And The Supply Of Money And Credit: General
Currency
Saving
Open Economy Macroeconomics
Domestic Credit
Credit
Wealth
Banks And Banking
Consumption
Money And Monetary Policy
Banking
International Monetary Arrangements And Institutions
Foreign Exchange Reserves
Macroeconomics
International Policy Coordination And Transmission
International Reserves
Conventional Peg
Exchange Rates
Macroeconomics: Consumption
Foreign Exchange
Monetary Policy
Economics
Online Access:
Collection: International Monetary Fund - Collection details see MPG.ReNa
Description
Summary:It is well known that the long-run viability of a fixed exchange rate regime imposes constraints on monetary policy. This paper shows that, in a model with forward-looking agents, short-run viability imposes a fiscal constraint. When policy change, which destroys long-run viability, also violates the fiscal constraint, collapse is instantaneous. Delayed predictable collapse requires satisfaction of the fiscal constraint
Physical Description:18 pages
ISBN:9781451855456

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