Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/82377
Authors: 
Storgaard, Peter Ejler
Year of Publication: 
2002
Series/Report no.: 
Danmarks Nationalbank Working Papers 3
Abstract: 
The paper develops a simple stochastic new open macroeconomic model in which pricesetting firms' choice between producer currency pricing and local currency pricing is endogenous. We show that, in equilibrium, firms will denominate their export price contracts in the currency of the country with the lowest level of monetary variability. A welfare maximising government's choice of exchange rate regime is also analysed, and we find that a fixed exchange rate is preferable if the domestic monetary variability is higher than the foreign one.
Subjects: 
new open-economy macroeconomics
producer currency pricing
local currency pricing
endogenous contract currencies
optimal exchange rate regime
JEL: 
F3
F4
Document Type: 
Working Paper

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