Autore
Pelloni, Alessandra

Titolo
Long-run consequences of finite exchange rate bubbles
Periodico
European University Institute of Badia Fiesolana (Fi). Department of Economics - Working papers
Anno: 1992 - Fascicolo: 71 - Pagina iniziale: 1 - Pagina finale: 38

This paper draws on the literature on exchange rate instability and on sunk-cost hysteresis to analyse the long-run effects of temporary exchange rate shocks. We propose two versions of the Dornbusch (1976) monetary model, modified so as to allow for endogenous adjustment in productive capacity, with the aggregate investment function being linear with respect to the exchange rate in one version and non-linear in the other. For both versions, we provide solutions for a Blanchard-type bubble (exogenously) developing on the foreign exhange market. We find that, if capacity adjusts nonlinearly, such a bubble will affect the steady-state of the economy.



Testo completo: http://hdl.handle.net/1814/422

Esportazione dati in Refworks (solo per utenti abilitati)