TY  - JOUR
AU  - Benigno,Pierpaolo
TI  - Are Valuation Effects Desirable from a Global Perspective?
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 12219
PY  - 2006
Y2  - May 2006
UR  - http://www.nber.org/papers/w12219
L1  - http://www.nber.org/papers/w12219.pdf
N1  - Author contact info:
Pierpaolo Benigno
Dipartimento di Scienze Economiche e Aziendali
Luiss Guido Carli
Viale Romania 32
00197 Rome
ITALY
Tel: 39-0685225-552
E-Mail: pbenigno@luiss.it
M2  - featured in NBER digest on 2006-05-15
AB  - Recent studies have emphasized the role of valuation effects due to exchange rate movements in easing the process of adjustment of the external balance of a country. This paper asks to what extent valuation effects are desirable from a global perspective as a mean to achieve an efficient allocation of resources. In a frictionless world, it is desirable to have large movements in prices and exchange rates. But once a small concern for price stability is introduced not only should prices be stabilized but also the response of the exchange rate should be muted. There is a minor role for valuation effects that depends both on the size and composition of assets and liabilities.
ER  -