Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/18724
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dc.contributor.authorMundaca, B. Gabrielaen_US
dc.contributor.authorStrand, Jonen_US
dc.date.accessioned2009-01-28T15:52:26Z-
dc.date.available2009-01-28T15:52:26Z-
dc.date.issued2004en_US
dc.identifier.urihttp://hdl.handle.net/10419/18724-
dc.description.abstractWe derive the optimal exchange rate policy for a small open economy subject to terms-oftradeshocks. Firm owners and workers are risk averse but workers more so. Wages are givenor partially indexed in the short run, and capital markets are imperfect. The government setsthe exchange rate to allocate risk between workers and owners. With less risk-averse firms,and greater difference in risk aversion between workers and firms, the optimal exchange rateshould vary little with pure terms-of-trade shocks but more with general shocks to prices.Optimal exchange rate variation is greater with indexed wages, but is smaller when firmsbehave monopolistically and when wage taxes (profit taxes) change procyclically(countercyclically) with export prices (import prices). The model gives policy rules fordetermining optimal variations of the exchange rate, and indicates when it is, and is not,optimal to join a currency union with trading partners, implying zero exchange rate variation.en_US
dc.language.isoengen_US
dc.publisher|aCenter for Economic Studies and Ifo Institute (CESifo) |cMunichen_US
dc.relation.ispartofseries|aCESifo Working Paper |x1361en_US
dc.subject.jelF41en_US
dc.subject.jelF33en_US
dc.subject.jelF31en_US
dc.subject.ddc330en_US
dc.subject.keywordcurrency banden_US
dc.subject.keywordmonetary unionen_US
dc.subject.keywordprice volatilityen_US
dc.subject.keywordoptimal risk allocationen_US
dc.subject.stwWechselkurspolitiken_US
dc.subject.stwTarget Zoneen_US
dc.subject.stwRisikoen_US
dc.subject.stwAllokationen_US
dc.subject.stwRisikoaversionen_US
dc.subject.stwPreisniveaustabilitäten_US
dc.subject.stwWährungsunionen_US
dc.subject.stwTheorieen_US
dc.titleA risk allocation approach to optimal exchange rate policyen_US
dc.typeWorking Paperen_US
dc.identifier.ppn477509207en_US
dc.rightshttp://www.econstor.eu/dspace/Nutzungsbedingungen-

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