Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/57760
Authors: 
Hoffmann, Mathias
Year of Publication: 
2005
Series/Report no.: 
CFR Working Paper 05-03
Abstract: 
This paper investigates the formalisation that in a small open economy flexible exchange rates act as a 'shock absorber' and mitigate the effects of external shocks more effectively. An intertemporal small open economy model with nominal rigidities, in which real shocks generate internal imbalances under fixed and flexible exchange rates, is laid out. The role of world interest rate and world output shocks in driving output, trade imbalances and real exchange rate fluctuations is investigated. Using a sample of 38 developing countries, the paper assesses whether the responses of real GDP, the trade balance and the real exchange rate to world real interest rate and world output shocks differ across exchange rate regimes.
Subjects: 
Small Open Economies
Exchange Rate Regimes
Panel VAR
JEL: 
C33
F31
F41
Document Type: 
Working Paper

Files in This Item:
File
Size
686.29 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.