Real Exchange Rate Targeting Under Imperfect Asset Substitutability
April 1, 1993
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Summary
This paper presents a model of an economy that uses nominal exchange rate policy to keep the real exchange rate constant at a certain target level, under imperfect asset substitutability. The paper discusses the determinants of inflation under such a policy, and examines the consequences of exogenous and policy-induced shocks on inflation, the external accounts, and the fiscal accounts. The shocks considered include changes in the real exchange rate target, changes in fiscal policy, changes in foreign interest rates, and open market sales of public sector domestic bonds.
Subject: Expenditure, Inflation, Public sector, Real exchange rates, Real interest rates
Keywords: central bank, private sector demand, rate of inflation, traded goods, WP
Pages:
30
Volume:
1993
DOI:
Issue:
038
Series:
Working Paper No. 1993/038
Stock No:
WPIEA0381993
ISBN:
9781451845624
ISSN:
1018-5941
Notes
Also published in Staff Papers, Vol. 40, No. 4, December 1993.
