NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Capital Mobility and Devaluation in an Optimizing Model with Rational Expectations

Maurice Obstfeld

NBER Working Paper No. 557 (Also Reprint No. r0182)
Issued in October 1980
NBER Program(s):   ITI   IFM

This paper examines the effects of ex-change-rate policies when individuals maximize lifetime utility on the basis of rational expectations about the future. The economy studied is one in which the authorities allow free mobility of capital under a crawling-peg exchange-rate regime. Many industrializing economies have adopted a crawling peg as a means of reconciling disparate inflation rates at home and abroad, and some recent efforts to use the rate of crawl as an instrument of anti-inflation policy have attracted considerable interest (see Carlos Diaz Alejandro). Tools similar to those employed here have been applied by Guillermo Calvo (forthcoming) to study this type of exchange-rate management under conditions of capital immobility.

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Document Object Identifier (DOI): 10.3386/w0557

Published: Obstfeld, Maurice. "Capital Mobility and Devaluation in an Optimizing Modelwith Rational Expectations." The American Economic Review, Vol. 71, No. 2,(May 1981), pp. 217-221. citation courtesy of

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