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Title: Exchange Rate Dynamics Redux

Author(s): Maurice Obstfeld and Kenneth Rogoff

Publication Date: February 1995

Keyword(s): Current Account, Exchange Rate Dynamics and Sticky-Price Macroeconomic Models

Programme Area(s): International Macroeconomics

Abstract: We develop an analytically tractable two-country model that marries a full account of global macroeconomic dynamics to a supply framework based on monopolistic competition and sticky nominal prices. The model offers simple and intuitive predictions about exchange rates and current accounts that sometimes differ sharply from those of either modern flexible-price intertemporal models, or traditional sticky-price Keynesian models. Our analysis leads to a novel perspective on the international welfare spillovers due to monetary and fiscal policies.

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Bibliographic Reference

Obstfeld, M and Rogoff, K. 1995. 'Exchange Rate Dynamics Redux'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=1131