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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Format: | eBook |
Language: | English |
Published: |
Washington, D.C.
International Monetary Fund
1997
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Series: | IMF Working Papers
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Online Access: | |
Collection: | International Monetary Fund - Collection details see MPG.ReNa |
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 |
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Physical Description: | 18 pages |
ISBN: | 9781451855456 |