A Center-Periphery Model of Monetary Coordination and Exchange Rate Crises

@inproceedings{Buiter1995ACM,
  title={A Center-Periphery Model of Monetary Coordination and Exchange Rate Crises},
  author={Willem H. Buiter and Giancarlo Corsetti and Paolo A. Pesenti},
  year={1995}
}
The paper analyzes the modalities and consequences of a breakdown of cooperation between the monetary authorities of inflation-prone Periphery Countries that use an exchange rate peg as an anti- inflationary device, when the Center is hit by an aggregate demand shock. Cooperation in the Periphery is constrained to be symmetric: costs and benefits must be equal for all. Our model suggests that there are at least two ways in which a generalized crisis of the exchange rate system may emerge. The… CONTINUE READING