On the relevance of floating exchange rate policies

Cunha, Alexandre B.

doi:10.1007/s00199-012-0694-2

Cited by 5 publications

(3 citation statements)

References 45 publications

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“…We believe that most works that encompass the “trilemma” share similar features, or in some cases, are directly derived from their model. In Section , we present the central argument of Cunha (), for which fiscal policies conflate with exchange rate effects.…”

Section: Impossible Trinity Remains Impossiblementioning

confidence: 99%

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A Theoretical Approach to Sterilized Foreign Exchange Intervention

Villamizar‐Villegas¹,

Pérez-Reyna

2015

Journal of Economic Surveys

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Abstract. In this paper, we survey prominent theories that have shaped the literature on sterilized foreign exchange interventions. We identify three main strands of literature: (1) that which deems interventions futile; (2) that which requires some market friction (i.e. limited arbitrage) in order for interventions to be effective; and (3) that which advocates the use of interventions as long as they convey signals on the stance of future monetary policy. We contribute to the literature in three important ways. First, by reviewing new theoretical models that have surfaced within the last decade. Second, by further penetrating into the theory of interventions in order to analyze the key features that make each model distinct. And third, by only focusing on sterilized operations, which allows us to sidestep the effects induced by changes in the stock of money supply. In addition, the models that we present comprise both a macro and microstructure approach so as to provide a comprehensive view of the theory behind exchange rate intervention.

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Section: Impossible Trinity Remains Impossiblementioning

confidence: 99%

“…Cunha () proposes a model of indeterminacy in the currency denomination and maturity structure of public debt. In the model, a floating exchange rate policy is able to support any competitive equilibrium induced by a fixed exchange rate regime.…”

Section: Impossible Trinity Remains Impossiblementioning

confidence: 99%

A Theoretical Approach to Sterilized Foreign Exchange Intervention

Villamizar‐Villegas¹,

Pérez-Reyna

2015

Journal of Economic Surveys

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“…We believe that most of the works that encompass the "trilemma" share similar features, or in some cases, are directly derived from their model. Finally, Section 3.1.2 presents the central argument of Cunha (2013), for which fiscal policies conflate with exchange rate effects.…”

Section: Impossible Trinity Remains Impossiblementioning

confidence: 99%

A survey on the effects of sterilized foreign exchange intervention

Villamizar‐Villegas¹,

Pérez-Reyna²

2015

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In this paper we survey prominent theories that have shaped the literature on sterilized foreign exchange interventions. We identify three main strands of literature: 1) that which advocates the use of sterilized interventions; 2) that which deems sterilized interventions futile;and 3) that which requires some market friction in order for sterilized interventions to be effective.We contribute to the literature in three important ways. First, by reviewing new theoretical models that have surfaced within the last decade. Second, by further penetrating into the theory of interventions in order to analyze the key features that make each model distinct. And third, by only focusing on sterilized operations, which allows us to sidestep the effects induced by changes in the stock of money supply. Additionally, the models that we present comprise both a macro and micro-structure approach so as to provide a comprehensive view of the theory behind exchange rate intervention.

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The productivity cost of sovereign default: evidence from the European debt crisis

2015

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We calibrate the cost of sovereign defaults using a continuous time model, where government default decisions may trigger a change in the regime of a stochastic TFP process. We calibrate the model to a sample of European countries from 2009 to 2012. By comparing the estimated drift in default relative to that in no-default, we find that TFP falls in the range of 3.70-5.88%. The model is consistent with observed falls in GDP growth rates and subsequent recoveries and illustrates why fiscal multipliers are small during sovereign debt crises.

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On the relevance of floating exchange rate policies

Cited by 5 publications

References 45 publications

A Theoretical Approach to Sterilized Foreign Exchange Intervention

A Theoretical Approach to Sterilized Foreign Exchange Intervention

A survey on the effects of sterilized foreign exchange intervention

The productivity cost of sovereign default: evidence from the European debt crisis

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