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Bonn Econ Discussion Papers, Bonn Graduate School of Economics (BGSE), Universität Bonn >
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http://hdl.handle.net/10419/22976
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| Title: | | Beggar Thy Neighbour: Exchange Rate Regime Misadvice from Misunderstandings of Mundell (1961)  |
| Authors: | | Pope, Robin |
| Issue Date: | | 2007 |
| Series/Report no.: | | Bonn econ discussion papers 2007,1 |
| Abstract: | | Mundell's optimal currency area model has been misconstrued, being at base an argument against multiple currencies as Mundell himself stated in that paper and frequently since. This paper shows two things. First use of this model has generated beggar-thy-neighbour advice concerning exchange rate changes. Second, because of its certainty assumptions, the model's findings that an exchange rate change could restore equilibrium after certain types of shocks is only plausible if 1) there to have been no prior exchange rate change in living memory, and 2) if there is something precluding any currency area subsequently generating another exchange rate change. |
| Subjects: | | optimal currency area exchange rate regime certainty uncertainty effects beggar-thyneighbour policies SKAT |
| JEL: | | F31 D80 |
| Document Type: | | Working Paper |
| Appears in Collections: | | Bonn Econ Discussion Papers, Bonn Graduate School of Economics (BGSE), Universität Bonn
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