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|کد مقاله||سال انتشار||مقاله انگلیسی||ترجمه فارسی||تعداد کلمات|
|7448||2004||22 صفحه PDF||سفارش دهید||8445 کلمه|
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Publisher : Elsevier - Science Direct (الزویر - ساینس دایرکت)
Journal : Journal of Macroeconomics, Volume 26, Issue 2, June 2004, Pages 287–308
This paper provides a complete analytical characterization of the positive and normative effects of alternative exchange rate regimes in a simple two-country sticky-price dynamic general equilibrium model with multiple shocks. A central question addressed is whether fixing the exchange rate prevents macroeconomic adjustment in relative prices from occurring. We find that in general, allowing the exchange rate to float does not facilitate relative price adjustment, in face of country-specific shocks. In a comparison of monetary policy rules which allow for differential degrees of exchange rate targeting, it is found that a rule in which both countries engage in a cooperative exchange rate peg welfare-dominates a rule which allows the exchange rate to float endogenously (as well as a one-sided peg). When optimal monetary rules can target both employment and exchange rates however, a cooperative exchange rate peg leads to lower welfare. Therefore, whether fixing the exchange rate involves a welfare cost depends critically upon the way in which monetary rules are designed. Quantitatively, we find that the welfare differences across different monetary rules (exchange rate regimes) are very small.
This paper explores the effects of alternative monetary rules that allow for varying degrees of exchange rate flexibility in a stochastic general equilibrium model, where prices are sticky, and there are a variety of different macroeconomic shocks. There has been a lively recent debate on the macroeconomic implications of alternative exchange rate regimes. The traditional literature, based on Friedman (1953) and Mundell (1961), argues for the importance of exchange rate flexibility in dealing with country specific disturbances. The cost of sacrificing the exchange rate as a macroeconomic adjustment device was seen as one of the key drawbacks of the European single currency (e.g. Feldstein, 1997). On the other hand, De Grauwe (1994) has set out the benefits of exchange rate stability within a single market, and recent evidence by Rose (2000) provides empirical support for the trade benefits of a single currency. The aim of this paper is to map out the trade-offs involved in stabilizing the nominal exchange rate, both from a positive and normative perspective, within a model that makes use of recent developments in open economy macroeconomics due to Obstfeld and Rogoff, 1995 and Obstfeld and Rogoff, 2000, Bachetta and Van Wincoop (2000), Corsetti and Pesenti (2001), and others. Specifically, we construct a two-country dynamic general equilibrium model in which prices are set in advance, in a stochastic environment, by profit-maximizing firms. The economy is subject to shocks to money demand and aggregate productivity.1 This framework can be used to address a variety of traditional questions in the comparison of exchange rate regimes. For instance, under what circumstances is exchange rate flexibility useful in offsetting country-specific macroeconomic disturbances? How does the manner in which the exchange rate is pegged matter––i.e. whether it is done cooperatively between monetary authorities or unilaterally by one country? Quantitatively, how important are the welfare differences between alternative exchange rate regimes? Finally, what are the characteristics of welfare maximizing monetary policies, and how much exchange rate flexibility is implied by these policies? The model also allows us to focus on some non-traditional aspects of alternative exchange rate regimes. In particular, because the analysis allows for an exact analytical solution in a dynamic, stochastic environment, alternative monetary policies have implications for employment, the capital stock, and long run GDP. An obvious but important point in the comparison of alternative exchange rate regimes is that the monetary policy rule through which exchange rates are targeted may be equally as important as the degree of exchange rate volatility itself. We focus on simple monetary rules where the policy variable can be targeted on some easily observable macroeconomic aggregate rather than directly on the underlying stochastic disturbances themselves. We first compare the implications of three different monetary rules that differ in the degree to which they target the exchange rate. The first rule simply involves a constant money growth rate, the second rule represents a unilateral exchange rate peg, while the third is a bilateral or cooperative peg. In each case the effects of these rules are compared to the allocation of an economy with fully flexible prices. Traditional theory suggests that in the face of country-specific disturbances, it is better to have a floating exchange rate so as to allow relative prices to adjust more easily. Our model, perhaps surprisingly, indicates that a floating exchange rate, in the absence of specific activist monetary policies, does not facilitate relative price adjustment. The reason is that without activist monetary policies, there is no guarantee that the exchange rate will move in the right direction to achieve the correct response to country specific shocks. In the light of this result, we find that there is no presumption that a monetary rule which allows for exchange rate adjustment (the constant money growth rule) will produce higher welfare than a pegged exchange rate regime. In fact, we find that, in the absence of activist monetary policies, the cooperative peg will welfare-dominate both a one-sided peg as well as a constant-money growth floating exchange rate regime. In all sticky price environments, we find that long run expected employment and GDP is lower than in the flexible price environment. Also, steady state employment and GDP are lower under a float than a cooperative peg. We may also apply the model towards a quantitative analysis of the differences between regimes. Here we find quite sharp results––both in terms of volatilities, in expected values, and in welfare terms, the difference between alternative monetary rules is extremely small. When the model is calibrated based on a consensual set of parameter values, the allocations and welfare levels across rules are very similar. While a cooperative peg dominates a floating regime, agents in our model would sacrifice only a tiny fraction of consumption to move from the latter regime to the former. To a first approximation agents are indifferent between all types of exchange rate regimes. While the standard case for floating exchange rates is that they generate desired relative price adjustment, a second argument is that they allow monetary policy a free hand. If monetary policy is designed optimally, then it cannot but do better than if it were constrained by the requirements of an exchange rate peg. To explore this argument, we extend the model to allow for a set of monetary policies that are more activist. The optimal monetary rules in this model are shown to be particularly simple––monetary authorities in each country should target employment rates. When each monetary authority prevents employment from moving away from the `natural rate', this sustains the first best allocation.2 Because such rules involve country specific monetary adjustment, by definition they require a system of exchange rate flexibility. But we also derive a constrained optimal monetary rule, that is consistent with a fixed exchange rate in which both countries pursue a cooperative peg. This rule requires each monetary authority to target an average index of global employment, as well as targeting the nominal exchange rate.3 While this rule can attain the desired response of real GDP in each country, it cannot attain the optimal employment response, in general. The rest of the paper is structured as follows. Section 2 presents the basic model with money and technology shocks. Section 3 develops the results under flexible prices. Section 4 analyzes the case of sticky prices, and compares alternative exchange rate rules. Section 5 analyzes welfare across the different regimes. Section 6 derives the results under welfare maximizing monetary rules. Some conclusions follow.
نتیجه گیری انگلیسی
This paper has examined the trade-off between fixed and floating exchange rates in a sticky-price dynamic, stochastic general equilibrium model with capital accumulation. The results suggest that the trade-off is quite at variance with much of the discussion in the policy literature. In our model, allowing the exchange rate to float does not help at all in the response to country-specific supply or demand policy shocks. In fact, fixed exchange rates may do better, by increasing employment and long run GDP, as well as welfare. But if the benchmark comparison is one where monetary policy can be `activist', where monetary rules can target employment, then giving up exchange rate flexibility will have real costs, both in terms of macroeconomic volatility and average long run GDP. Overall, however, when quantified in this model, the welfare differences between alternative exchange rate regimes is very small. We have focused only on velocity shocks and productivity shocks. But it can be shown that the presence of government spending shocks has no affect on the welfare comparison between fixed and floating carried out in Section 5. Since the exchange rate will not in general respond directly to governments spending shocks, a passive floating exchange rate regime does not improve welfare relative to a peg, and moreover, for the same reasons as before, a cooperative peg still welfare dominates. There are a number of caveats. Special functional forms are used in order to facilitate an analytical solution, and the model has only one period price setting. But in fact the result that productivity shocks do not directly affect the exchange rate extends to more general preference specifications (see Devereux and Engel, 2003). Also, it is worthwhile to note that the functional forms used are very close to those employed in the quantitative International Real Business Cycle literature, so it is not clear how limiting the present model is. A more general analysis would presumably need to allow for a more persistent degree of price rigidity, along the lines of Calvo (1983) or Taylor (1979). Extending our model to allow for this would make it necessary to employ numerical solution methods. This is left for future research. Nonetheless, our analysis may throw some light on the debate about the costs and benefits of exchange rate flexibility. In this vein, we might interpret the results as providing a cautionary note about the adjustment properties of floating exchange rates.