Working Paper: NBER ID: w0841
Authors: Robert P. Flood; Peter M. Garber; Louis O. Scott
Abstract: In this paper we show, in an example, that the arbitrary behavior which results in an indeterminacy in the time path of a flexible exchange rate and is associated with "badly behaved" speculation has a manifestation under a regime of fixed rates in an indeterminacy in the time path of government holding of international reserves. Thus, to the extent that arbitrariness is characteristic of agents' behavior it is not resolve6 but only masked by the fixing of exchange rates.
Keywords: indeterminacy; exchange rates; speculative behavior
JEL Codes: No JEL codes provided
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| indeterminacy in flexible exchange rate regimes (F31) | indeterminacy in fixed exchange rate regimes (F31) |
| speculative attacks on fixed exchange rates (F31) | arbitrary behavior of agents (D01) |
| timing of collapse in fixed exchange rate regimes (F31) | level of reserves (Q30) |
| behavior of agents (L85) | stability of the exchange rate regime (F33) |
| increase in reserves (F31) | delay in collapse of fixed regime (P39) |
| increase in interest rate (E43) | hasten collapse of fixed regime (P39) |