TY  - JOUR
AU  - Mussa,Michael
TI  - The Real Exchange Rate as a Tool of Commercial Policy
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 1577
PY  - 1985
Y2  - March 1985
UR  - http://www.nber.org/papers/w1577
L1  - http://www.nber.org/papers/w1577.pdf
N1  - Author contact info:
Michael L. Mussa
E-Mail: N/A user is deceased
AB  - This paper develops a dynamic, rational expectations model that generalizes both the standard, two-country, two-commodity model of real trade theory and the "dependent economy" model of open economy macroeconomics. This model is used to show how a variety of government policies can affect the real exchange rate (defined as the relative price of domestic goods in terms of foreign goods) and thereby replicate some of the effects of commercial policy. The policies considered include temporary and expected future shifts in the distribution of government spending, temporary general tax reductions financed by the issuance of government debt, controls on international capital movements, and policies that combine a fixed path of the nominal exchange rate and a fixed path of the nominal money supply (supported by sterilized official intervention in the foreign exchange market).
ER  -