@techreport{NBERw18092,
 title = "Managing Currency Pegs",
 author = "Stephanie Schmitt-Grohé and Martín Uribe",
 institution = "National Bureau of Economic Research",
 type = "Working Paper",
 series = "Working Paper Series",
 number = "18092",
 year = "2012",
 month = "May",
 URL = "http://www.nber.org/papers/w18092",
 abstract = {The combination of a fixed exchange rate and downward nominal wage rigidity creates a real rigidity.  In turn, this real rigidity makes the economy prone to involuntary unemployment  during external crises. This paper presents a graphical analysis of alternative policy strategies aimed at mitigating this source of inefficiency.  First- and second-best monetary and fiscal solutions are analyzed.  Second-best solutions are found to be prudential, whereas first-best solutions  are not.},
}