Dornbusch’s Overshooting Model After Twenty-Five Years
February 1, 2002
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Summary
This Mundell Fleming lecture at the International Monetary Fund’s 2001 annual research conference marks the 25th anniversary of Rudiger Dornbusch’s masterpiece, “Expectations and Exchange Rate Dynamics,” a seminal contribution to both policy and research in the field of international finance. This essay provides a simple overview of the model as well as some empirics, not only on exchange rates but on measures of the paper’s influence. Last, but not least, I offer some personal reflections on how Dornbusch conveyed the ideas in his “overshooting model” to inspire a generation of students.
Subject: Demand for money, Exchange rates, Foreign exchange, Monetary base, Money, Prices, Rational expectations, Real exchange rates, Sticky prices
Keywords: Demand for money, Dornbusch model, Europe, exchange rate, exchange rates, forward rate, international economics, Monetary base, money demand, Overshooting, overshooting paper, rational expectations reformulation, Real exchange rates, Sticky prices, thought experiment, variant Dornbusch, WP
Pages:
41
Volume:
2002
DOI:
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Issue:
039
Series:
Working Paper No. 2002/039
Stock No:
WPIEA0392002
ISBN:
9781451845846
ISSN:
1018-5941
