Auteurs Centres de recherche Disciplines et Collections Projets
Français English
 
 

On the Contingency of Equilibrium Exchange Rates with Time - Consistent Economic Policies

 

Notice

Type:   Working paper
 
Titre:   On the Contingency of Equilibrium Exchange Rates with Time - Consistent Economic Policies
 
Auteur(s):   Bouveret, Antoine (PhD) - Observatoire français des conjonctures économiques (Auteur)
Ducoudre, Bruno (PhD) - Observatoire français des conjonctures économiques (Auteur)
 
Date de publication:   2007-03
 
Collection:   Documents de travail de l'OFCE  :  2007-08
 
JEL:   F31,  F32,  F41,  F42
 
Résumé:   [en] Equilibrium exchange rate theories (FEER, BEER and NATREX) make the assumption that the Real Equilibrium Exchange Rate (RER) is independent from internal equilibrium and economic policies. We develop a model in which economic policies depend on the minimisation of an intertemporal loss function, and we show that in a Wage Setting-Price Setting (WS-PS) framework, the RER depends on the policymakers’ objectives, making the previous assumptions highly questionable. We provide some results for the impact of policymakers’ preferences on the long run exchange rate and discuss the concept of inflation illusion. In our model, the long run (equilibrium) exchange rate is contingent on policymakers’ preferences, implying that equilibrium exchange rate estimates must be treated with great caution.
 
 

Pour citer cette publication

 

Fichiers

Version Format Fichier Taille
Version de l'éditeur wp2007-08.pdf 0,25 MB