A Model of Foreign Exchange Rate Indetermination
(856 K)
|
NBER Working Paper No. 5766
Issued in September 1996
NBER Program(s): IFM
Economic agents undertake actions to protect themselves from the short-run impact of foreign exchange rate fluctuations: Nominal goods prices are set in consumers' currencies, and firms hedge foreign exchange risk. A model is presented here which shows that these features of the economy can lead to indeterminacy in the nominal exchange rate in the short run. There can be noise in the exchange rate, unrelated to any fundamentals, essentially because the short-run fluctuations do not influence any rational agent's behavior. Empirical implications of this sort of noise are explored.
This paper is available as PDF (856 K) or via email.
Machine-readable bibliographic record -
MARC,
RIS,
BibTeX
|
|
|
About
Support
The research activities of the NBER are funded by grants from federal research agencies, by private foundations, and by generous donations from our corporate associates and from private individuals. The NBER is a non-profit, 501(c)(3) organization. For information on supporting the NBER, please contact:
Mr. Denis Healy, Director of Development
NBER
1050 Massachusetts Avenue
Cambridge, MA 02138-5398
ph: 617-868-3900
email: dhealy@nber.org
Close
