NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Exchange Rate Dynamics With Sluggish Prices Under Alternative Price-Adjustment Rules

Maurice Obstfeld, Kenneth Rogoff

NBER Working Paper No. 1173 (Also Reprint No. r0555)
Issued in August 1983
NBER Program(s):   ITI   IFM

This paper studies exchange rate behavior in models with moving long-run equilibria incorporating alternative price-adjustment mechanisms.The paper demonstrates that price-adjustment rules proposed by Mussa andby Barro and Grossman yield models that are empirically indistinguishable from each other. For speeds of goods-market adjustment that are "too fast," the Barro-Grossman rule appears to induce instability; but we argue that when the ruleis interpreted properly, models incorporating it are dynamically stable regardless of the speed at which disequilibriumis eliminated. The Barro-Grossman pricing scheme is shown to be a natural generalization, to a setting of moving long-run equilibria, of less versatile schemes proposed in earlier literature on exchange rate dynamics.

download in pdf format
   (304 K)

email paper

This paper is available as PDF (304 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w1173

Published: Obstfeld, Maurice & Rogoff, Kenneth, 1984. "Exchange Rate Dynamics with Sluggish Prices under Alternative Price-Adjustment Rules," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 25(1), pages 159-74, February. citation courtesy of

Users who downloaded this paper also downloaded these:
Obstfeld and Rogoff w4693 Exchange Rate Dynamics Redux
Engel and Morley w8550 The Adjustment of Prices and the Adjustment of the Exchange Rate
Frankel and Rose w4865 A Survey of Empirical Research on Nominal Exchange Rates
Froot and Rogoff w4952 Perspectives on PPP and Long-Run Real Exchange Rates
Obstfeld and Stockman w1230 Exchange-Rate Dynamics
 
Publications
Activities
Meetings
NBER Videos
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us