Journal Article: ‘Financial market segmentation and choice of exchange rate regimes’
Abstract:We study the choice of exchange rate regime in a small open economy with segmented asset markets subjected to financial sector shocks. We show that the state-contingent optimal policy facilitates risk sharing between asset market participants and non-participants, and is counter-cyclical. Our results establish that contrary to existing literature, flexible exchange rates mimic optimal policy and welfare dominates fixed exchange rates.
Authors’ Name : Vipul Mathur & Chetan Subramanian
URL : http://www.sciencedirect.com/science/article/pii/S0165176516300647
Journal : Economics Letters
Volume, Issue, Page Numbers: Volume 142, May 2016, Pages 78–82
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