Glaubwürdigkeit, Zeitinkonsistenz und Zinsdifferenzen in einem System fester Wechselkurse

Abstract

Credibility, Time Inconsistency and Interest Rate Differences in a Fixed Exchange Rate System

The Barro-Gordon model can be applied to an open economy. If the welfare function of the economic policy agent exhibits a preference for the target of employment, the promise to keep a fixed exchange rate is not credible as a devaluation enhances employment in case of lagging exchange rate expectations. In anticipation of a cheating of national policy makers devaluation expectations emerge causing interest differences between financial assets denominated in different currencies. Accordingly, economic policy has to choose between two unfavourable alternatives: to defend the fixed exchange rate by means of high interest rates causing employment losses or to execute an already expected devaluation aggravating the risk of inflation. Interest rate differences and currency crises in the EMS can be conceived as partly failed attempts to base economic and monetary policies on long-term targets and commitments.