The Economics of Flexible Exchange Rates
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Frisch, H., Schwödiauer, G. (Eds.) (1980). The Economics of Flexible Exchange Rates. Proceedings of a Conference at the Institute for Advanced Studies, Vienna, March 29 - 31, 1978. Duncker & Humblot. https://doi.org/10.3790/978-3-428-44644-5
Frisch, Helmut and Schwödiauer, Gerhard. The Economics of Flexible Exchange Rates: Proceedings of a Conference at the Institute for Advanced Studies, Vienna, March 29 - 31, 1978. Duncker & Humblot, 1980. Book. https://doi.org/10.3790/978-3-428-44644-5
Frisch, H, Schwödiauer, G (eds.) (1980): The Economics of Flexible Exchange Rates: Proceedings of a Conference at the Institute for Advanced Studies, Vienna, March 29 - 31, 1978, Duncker & Humblot, [online] https://doi.org/10.3790/978-3-428-44644-5
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The Economics of Flexible Exchange Rates
Proceedings of a Conference at the Institute for Advanced Studies, Vienna, March 29 - 31, 1978
Editors: Frisch, Helmut | Schwödiauer, Gerhard
Beihefte zu / Supplements to »Kredit und Kapital«, Vol. 6
(1980)
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Table of Contents
| Section Title | Page | Action | Price |
|---|---|---|---|
| Contents | V | ||
| Preface | VII | ||
| Martin Bronfenbrenner: A Partial Indexation Scheme | 1 | ||
| Rationale | 1 | ||
| A Partial Indexation Formula | 3 | ||
| Three Irritating Questions | 5 | ||
| Alternatives to Indexation | 9 | ||
| Deflation and Quasi-Deflation | 12 | ||
| Emil-Maria Claassen: Comment on M. Bronfenbrenner, "A Partial Indexation Scheme” | 14 | ||
| Staffan Viotti: Inflation, the Terms of Trade and Flexible Exchange Rates | 18 | ||
| I. Introduction | 18 | ||
| II. The Model | 19 | ||
| III. Some Long-Run Properties | 24 | ||
| IV. The Adjustment Process | 26 | ||
| V. Effects of Foreign Disturbances and Economic Policy | 33 | ||
| VI. Conclusions | 41 | ||
| References | 46 | ||
| Benjamin J. Cohen: Comment on S. Viotti, "Inflation, the Terms of Trade and Flexible Exchange Rates" | 47 | ||
| Masanao Aoki: Short-Run Asset and the Real Sector Dynamics of a Small Open Economy under Flexible Exchange Rates | 50 | ||
| 1. Introduction | 50 | ||
| 2. Model | 54 | ||
| 3. Short-Run Analysis | 57 | ||
| 3.1 Asset Sector | 58 | ||
| 3.2 Real Sector | 59 | ||
| 3.3 Feedback Paths | 64 | ||
| 3.4 The Current Account | 65 | ||
| 4. Short-Run Dynamic Equation | 66 | ||
| 5. Discussions and Conclusions | 71 | ||
| Appendix 1 | 74 | ||
| Appendix 2 | 76 | ||
| References | 79 | ||
| Dieter Bender: Comment on M. Aoki, "Short-Run Asset and the Real Sector Dynamics of a Small Open Economy under Flexible Exchange Rates" | 81 | ||
| References | 86 | ||
| Paul De Grauwe – Alfred Steinherr – Giorgio Basevi: The Dynamics of Intervention in Foreign Exchange Markets: Purchasing Power Parity as a Guideline | 88 | ||
| 1. Introduction | 88 | ||
| 2. The Basic Model | 89 | ||
| 2.1 Financial markets | 89 | ||
| 2.2 The goods market | 91 | ||
| 2.3 The conditions of equilibrium | 92 | ||
| 3. Expectations | 92 | ||
| 4. The OPTICA-Rule | 93 | ||
| 5. Stability Analysis with Rational Expectations | 94 | ||
| 5.1 Free floating | 97 | ||
| 5.2 OPTICA-intervention | 99 | ||
| 6. Stability Analysis with Adaptive Expectations | 100 | ||
| 6.1 Free floating | 101 | ||
| 6.2 OPTICA-intervention | 102 | ||
| 7. Conclusions | 103 | ||
| Appendix | 104 | ||
| References | 112 | ||
| Emil-Maria Claassen: Comment on P. De Grauwe, A. Steinherr and G. Basevi, "The Dynamics of Intervention Rules in Foreign Exchange Markets" | 113 | ||
| Jacob A. Frenkel: The Demand for International Reserves under Pegged and Flexible Exchange Rate Regimes and Aspects of the Economics of Managed Float | 116 | ||
| I. Introduction | 116 | ||
| II.1 The Determinants of the Demand for International Reserves | 117 | ||
| II.2 Cross-Sectional Estimates of the Demand for International Reserves | 119 | ||
| II.3 Pooled Time-Series and Cross-Sections: Pegged Versus Floating Exchange Rates | 123 | ||
| III. When Did the System Move from Pegged to Floating Rates? | 127 | ||
| IV. A Sketch of a Framework for the Analysis of Managed Float | 131 | ||
| V. Concluding Remarks | 137 | ||
| Appendix A | 141 | ||
| Appendix B | 147 | ||
| References | 149 | ||
| Heidi Schelbert: Comment on J. A. Frenkel, "International Reserves: Pegged Exchange Rates and Managed Float" | 152 | ||
| Dale W. Henderson: The Dynamic Effects of Exchange Market Intervention Policy: Two Extreme Views and a Synthesis | 156 | ||
| I. Introduction | 156 | ||
| II. The Building Blocks for the Three Versions of the Model | 159 | ||
| III. The Effects of Intervention Policy When Only the Trade Surplus Affects the Adjustment Path of the Economy | 165 | ||
| IV. The Effects of Intervention Policy When Only Slow Price Adjustment Affects the Adjustment Path of the Economy | 178 | ||
| V. The Effects of Intervention Policy When Both the Trade Surplus and Slow Price Adjustment Affect the Adjustment Path of the Economy | 190 | ||
| VI. Concluding Remarks | 205 | ||
| References | 209 | ||
| Walter S. Salant: Comment on D. Henderson, "The Dynamic Effects of Exchange Market Intervention Policy: Two Extreme Views and a Synthesis" | 210 | ||
| Jürgen Siebke: Comment on D. Henderson, "The Dynamic Effects of Exchange Market Intervention Policy: Two Extreme Views and a Synthesis" | 220 | ||
| Härmen Lehment: Exchange-Market Interventions and Open-Market Operations as Instruments of Active Employment Policy under Flexible Exchange Rates | 224 | ||
| I. Introduction | 224 | ||
| II. Monetary Policies and Employment with Rigid Nominal Wages | 225 | ||
| III. Monetary Policies and Employment with Downward Rigidity of Real Wages | 232 | ||
| IV. Summary and Implications for the Present Controversy about an International Coordination of Monetary Policies | 238 | ||
| Appendix I | 244 | ||
| Appendix II | 245 | ||
| References | 247 | ||
| Jürgen Schroeder: Comment on H. Lehment, "Exchange-Market Interventions and Open-Market Operations as Instruments of Active Employment Policy under Flexible Exchange Rates" | 248 | ||
| William G. Dewald: Monetary and Fiscal Actions: Did Their Relative Importance in the United States Change with Flexible Exchange Rates? | 252 | ||
| The Model | 253 | ||
| Hypothesized Structural Changes Due to Floating | 257 | ||
| Structural Changes in the Spending Equation | 259 | ||
| Structural Change in the Price Anticipations Equation | 261 | ||
| Structural Change in the Price Equation | 264 | ||
| Structural Change in the Output Equation | 269 | ||
| Extrapolation of the Before-Floating U.S. Model | 269 | ||
| Summary and Conclusions | 271 | ||
| Appendix | 275 | ||
| Manfred J. M. Neumann: A Comment on W. G. Dewald "Monetary and Fiscal Actions: Did Their Relative Importance in the United States Change with Flexible Exchange Rates?" | 276 | ||
| On the Relative Importance of Money and Government Spending under Different Exchange Rate Regimes | 277 | ||
| On the Role of Import Prices | 281 | ||
| References | 284 | ||
| Robert Solomon: Comment on W. G. Dewald "Monetary and Fiscal Actions: Did Their Relative Importance in the United States Change with Flexible Exchange Rates?" | 285 | ||
| Theoretical Hypotheses | 285 | ||
| The Model | 286 | ||
| The Statistical Results | 287 | ||
| Conclusion | 288 | ||
| References | 289 | ||
| M. M. G. Fase and A. P. Huijser: A Reaction Function for Foreign Exchange Intervention in the Netherlands: Some Empirical and Methodological Considerations | 290 | ||
| 1. Intervention Policy in the Netherlands, 1973–1977 | 291 | ||
| 2. An Analytical Framework for Foreign Exchange Intervention | 299 | ||
| 2.1 The Reaction Function | 299 | ||
| 2.2 The Money and Foreign Exchange Markets | 301 | ||
| 2.3 Foreign Exchange Intervention | 305 | ||
| 3. Estimation of Intervention Behaviour: 1973–1977 | 308 | ||
| 4. Conclusions | 314 | ||
| Appendix A | 315 | ||
| Appendix B | 316 | ||
| References | 319 | ||
| Frank Münnich: Comment on M. M. G. Fase and A. P. Huijser, "A Reaction Function for Foreign Exchange Intervention in the Netherlands" | 320 | ||
| Peter Bernholz, Peter Kugler: An Empirical Model of the Short Run Fluctuations of Exchange Rates: The Case of the Deutschmark (DM) and the Swiss Franc (SFR) | 323 | ||
| 1. Introduction | 323 | ||
| 2. The Model | 325 | ||
| 3. The Results for the DM | 330 | ||
| 4. The result for the SFR | 335 | ||
| 5. Conclusion | 339 | ||
| M. Ishaq Nadiri: Comments on P. Bernholz and P. Kugler, "An Empirical Model of the Short-Run Fluctuations of Exchange Rates: The Case of the Deutschmark (DM) and the Swiss Franc (SFR)" | 342 | ||
| Werner Gaab: On the Role of Interest Arbitrage, Speculation, and Commercial Hedging in the Determination of the Forward Exchange Rate: The Case of the Flexible German Mark, 1974–1977 | 345 | ||
| I. Introduction | 345 | ||
| II. Theoretical Framework | 347 | ||
| III. Specification of Exchange Rate Expectations | 351 | ||
| IV. Empirical Results | 356 | ||
| V. Conclusions | 366 | ||
| References | 376 | ||
| Hans-Jürgen Vosgerau: Comment on W. Gaab, "On the Role of Interest Arbitrage, Speculation, and Commercial Hedging in the Determination of the Forward Exchange Rate: The Case of the Flexible German Mark, 1974–1977" | 378 | ||
| Heinz Handler: The Exchange Rate as an Intermediate Target of Stabilization Policy in Austria | 382 | ||
| 1. Introduction | 382 | ||
| 2. The Conceptual Framework of Austria’s Hard Currency Policy | 383 | ||
| 3. The Scandinavian Inflation Model | 385 | ||
| 3.1 The Standard Scandinavian Model | 385 | ||
| 3.2 A Modified Model | 387 | ||
| 3.3 Some Empirical Evidence for Austria | 391 | ||
| 4. The Vicious Circle Argument | 392 | ||
| 5. The Currency Area Argument | 395 | ||
| 6. Concluding Remarks | 397 | ||
| References | 399 | ||
| Karl Socher: The Experience with Floating Exchange Rates in Austria | 401 | ||
| History of Floating Exchange Rates | 401 | ||
| Stabilization: The ATM of Managed Floating | 402 | ||
| The Politics of Exchange-Rate Policies | 402 | ||
| The Effects of Stabilization Policy | 403 | ||
| Free Floating? | 406 | ||
| How to Manage Floating? | 407 | ||
| The Limits of Managed Floating | 409 | ||
| Ewald Nowotny: Comments on K. Socher, "The Experience with Floating Exchange Rates in Austria” and H. Handler "The Exchange Rate as an Intermediate Target of Stabilization Policy in Austria" | 411 | ||
| Kurt Schitknecht: Comments on K. Socher, "The Experience with Floating Exchange Rates in Austria” and H. Handler, "The Exchange Rate as an Intermediate Target of Stabilization Policy in Austria" | 415 | ||
| Fritz Schebeck – Hannes Suppanz – Gunther Tichy: The Effect of Exchange Rate Changes on Foreign Trade in Manufactured Goods and on Prices in Small Open Economies – Preliminary Results for Austria | 419 | ||
| 1. Flexible Exchange Rates and Exchange Rate Policy in Austria | 419 | ||
| 2. The Theory of Revaluation and Devaluation in a Small Open Economy | 421 | ||
| 3. Data on Austria’s Foreign Trade in Manufactured Goods 1960–1976 | 424 | ||
| 4. Import Functions, Export Functions, and Price Functions for Manufactures | 431 | ||
| List of Variables | 433 | ||
| 5. Simulation of the Effects of Exchange Rate Changes Using a Small Model for the Austrian Trade in Manufactures | 436 | ||
| 6. The Likely Effects of a Devaluation in a Small Open Economy | 443 | ||
| 7. Some Concluding Remarks | 444 | ||
| Paul De Grauwe: Financial Policies in the Industrialized Countries and the Volatility of Exchange Rates | 446 | ||
| 1. Introduction | 446 | ||
| 2. The Model | 447 | ||
| 2.1 Generalities | 447 | ||
| 2.2 The equations of the model | 448 | ||
| 2.2.1 The monetary block | 448 | ||
| 2.2.2 The policy reaction block | 450 | ||
| 2.2.2.1 The domestic reaction function | 450 | ||
| 2.2.2.2 The foreign exchange market intervention | 451 | ||
| 2.2.3 The price block | 452 | ||
| 2.3 The structure of the model | 452 | ||
| 2.4 The estimated equations | 454 | ||
| 2.4.1 Monetary block | 454 | ||
| 2.4.2 The policy reactions block | 456 | ||
| 2.4.3 The Price block | 457 | ||
| 3. Dynamic Simulation | 458 | ||
| 4. Policy Simulations | 458 | ||
| 4.1 The effect of an increase in the Eurodollar interest rate (pure floating) | 460 | ||
| 4.2 The effects of a domestic monetary expansion (pure floating) | 463 | ||
| 4.3 The effect of a speculative cycle (pure floating) | 463 | ||
| 4.4 Simulation of the model under managed floating | 465 | ||
| 5. Conclusion | 471 | ||
| Appendix | 473 | ||
| References | 477 | ||
| International Economics Research Papers | 478 | ||
| Sven W. Arndt: Comment on P. De Grauwe, "Financial Policies in the Industrialized Countries and the Volatility of Exchange Rates" | 479 | ||
| Alfred Steinherr: Comment on P. De Grauwe, "Financial Policies in the Industrialized Countries and the Volatility of Exchange Reserves" | 484 | ||
| 1. The Model | 484 | ||
| 2. Estimation | 485 | ||
| 3. Simulation Results | 487 | ||
| List of Editors and Contributors | 489 |