Monetary and Real Shocks, Productive Capacity and Exchange Rate Regimes

Bibliographic Data

ID9727085
AuthorsJoshua Aizenman (0000-0002-7213-6105, corresponding author)
Year1994
Volume61
Issue244
Pages407
Publication date1994-11-01
Peer ReviewedYes
Open AccessNo
TypeARTICLE
VenueEconomica (JOURNAL)
Journal identifiersISSN: 0013-0427 • E-ISSN: 1468-0335
PublisherJSTOR (PUBLISHER)
DOI10.2307/2555031
OpenAlexW1986734043
LanguageEN
Citations received6
References cited3

This paper constructs an intertemporal version of a monopolistic competitive framework where producers may diversify internationally. International diversification is shown to induce a positive correlation between the volatility of productivity shocks and investment. In the presence of a Phillips curve, the expected GNP is lower under a floating-exchange-rate regime than under a fixed-exchange-rate regime. This result applies both for real and monetary shocks. Attempts to reduce foreign direct investment by capital controls will tend to reduce welfare without affecting the author's results regarding the ranking of exchange-rate regimes. Copyright 1994 by The London School of Economics and Political Science

Business · Diversification (marketing strategy) · Econometrics · Economics · Exchange rate · Exchange-rate regime · Foreign direct investment · Macroeconomics · Monetary economics · Volatility (finance) · Global Financial Crisis and Policies · Global trade and economics · Monetary Policy and Economic Impact

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