Year: 1980
Type: report
Abstract: This paper investigates the adjustment process to a reduction in the rate of credit creation in an open, flexible exchange rate economy.The framework of analysis is one of rational expectations with respect to interest rates, inflation and depreciation.The special feature of the model is the role of exchange market intervention and the resulting endogeneity of the money stock.The model is of empirical interest because of the growing experience in countries such as Israel, Spain or Argentina with th fact that monetary disinflation rapidly leads to real appreciation, unemployment and money creation induced by exchange market intervention.With capital flows and induced money creation threatening attempts at stabilization, there is a need to understand the relationship between intervention and inflation.
DOI: 10.3386/w0472
Author: Rudiger Dornbusch
Institution: National Bureau of Economic Research
Language: English
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W1517357498