TY  - JOUR
AU  - Flood,Robert P.
AU  - Hodrick,Robert J.
TI  - Real Aspects of Exchange Rate Regime Choice with Collapsing Fixed Rates
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 1603
PY  - 1985
Y2  - May 1985
UR  - http://www.nber.org/papers/w1603
L1  - http://www.nber.org/papers/w1603.pdf
N1  - Author contact info:
Robert Flood
Notre Dame
E-Mail: rflood1@nd.edu

Robert J. Hodrick
Graduate School of Business
Columbia University
3022 Broadway
New York, NY 10027
Tel: 212/854-3413
Fax: 212/316-9219
E-Mail: rh169@columbia.edu
AB  - Typical evaluations of the choice of exchange rate regime employ a criterion function that depends on the real performance of the economy, and they focus on regimes that are expected to last indefinitely. This latter feature is strongly contradicted by the transitory nature of actual regimes.This paper extends the recent literature on collapses of fixed exchange rate regimes with exogenous real sectors to examine how the predictions of two popular models for the determination of some real economic variables must be modified when agents rationally perceive that the fixed rate regime will be transitory. The models studied are simple stochastic versions of the models in Dornbusch (1976) and Flood and Marion (1982).
ER  -