Exchange Rates and Monetary Spillovers - Sciences Po Access content directly
Journal Articles Theoretical Economics Year : 2018

Exchange Rates and Monetary Spillovers

Abstract

When do flexible exchange rates prevent monetary and financial conditions from spilling over across currencies? We examine a model in which international investors strategically supply capital to a small inflation‐targeting economy with flexible exchange rates. For some combination of parameters, the unique equilibrium exhibits the observed empirical feature of prolonged episodes of capital inflows and appreciation of the domestic currency, followed by reversals where capital outflows go hand‐in‐hand with currency depreciation, a rise in domestic interest rates, and inflationary pressure. Arbitrarily small shocks to global financial conditions suffice to trigger these dynamics.
Fichier principal
Vignette du fichier
2018-plantin-et-shin-exchange-rates-and-monetary-spillovers.pdf (278.95 Ko) Télécharger le fichier
Origin : Publisher files allowed on an open archive

Dates and versions

hal-03391932 , version 1 (21-10-2021)

Licence

Attribution - NonCommercial

Identifiers

Cite

Guillaume Plantin, Hyun Song Shin. Exchange Rates and Monetary Spillovers. Theoretical Economics, 2018, 13 (2), pp.637 - 666. ⟨10.3982/TE2669⟩. ⟨hal-03391932⟩
19 View
25 Download

Altmetric

Share

Gmail Facebook X LinkedIn More