TY  - JOUR
AU  - Turnovsky,Stephen J.
TI  - Domestic and Foreign Disturbances in an Optimizing Model of Exchange-   Rate Determination
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 1407
PY  - 1985
Y2  - October 1985
UR  - http://www.nber.org/papers/w1407
L1  - http://www.nber.org/papers/w1407.pdf
N1  - Author contact info:
Stephen Turnovsky
Department of Economics
301 Savery Hall; Mail Stop DK 30
University of Washington
Seattle, WA   98195
Tel: 206-545-8028
E-Mail: sturn@u.washington.edu
AB  - This paper analyzes the effects of various disturbances of domestic and foreign origin in a small open economy under imperfect capital mobility in which the behavioral relationships are derived from optimization by the private sector. In this model the domestic economy jumps instantaneously to its new equilibrium following a change in either the domestic monetary growth rate or domestic fiscal policy. In response to a disturbance in either the foreign interest rate or inflation rate,the economy undergoes an initial partial jump towards its new equilibrium,which it there after approaches gradually. The implications of these results for exchange rate adjustment and the insulation properties of flexible exchange rates are discussed.
ER  -