An Exploration in the Theory of Exchange-Rate Regimes

DSpace/Manakin Repository

An Exploration in the Theory of Exchange-Rate Regimes

Citable link to this page


Title: An Exploration in the Theory of Exchange-Rate Regimes
Author: Helpman, Elhanan
Citation: Helpman, Elhanan. 1981. An exploration in the theory of exchange-rate regimes. Journal of Political Economy 89(5): 865-890.
Full Text & Related Files:
Abstract: Three exchange-rate regimes--a float, a one-sided peg, and a cooperative peg--are evaluated and compared in terms of efficiency and welfare levels. The framework of analysis embodies country-specific monies, with the money of each country being used to transact in its commodity markets and its currency-denominated bonds. Welfare levels depend only on consumption levels. In the presence of perfect foresight all equilibrium allocations are Pareto efficient. In a floating exchange-rate regime the perfect foresight equilibrium allocation coincides with an equilibrium of a costless barter economy. The same result holds in a one-sided peg if the pegging country's exchange-rate stabilizing authority breaks even over time. In a cooperative peg regime there is a different equilibrium allocation for each combination of exchange-rate levels and monetary policies. Problems of policy coordination and conflicts in desired monetary policies are discussed.
Published Version: doi:10.1086/261011
Terms of Use: This article is made available under the terms and conditions applicable to Other Posted Material, as set forth at
Citable link to this page:
Downloads of this work:

Show full Dublin Core record

This item appears in the following Collection(s)


Search DASH

Advanced Search