Real Exchange Rate Overshooting and the Output Cost of Bringing Down Inflation

@article{Buiter1981RealER,
  title={Real Exchange Rate Overshooting and the Output Cost of Bringing Down Inflation},
  author={W. Buiter and Marcus H. Miller},
  journal={Monetary Economics},
  year={1981}
}
  • W. Buiter, Marcus H. Miller
  • Published 1981
  • Economics
  • Monetary Economics
The proposition that under a floating exchange rate regime restrictive monetary policy can lead to substantial "overshooting" of the nominal and real exchange rate is now accepted fairly widely. The fundamental reason is the presence of nominal stickiness or inerta in domestic factor and product markets combined with a freely flexible nominal exchange rate. Current and anticipated future monetary policy actions are reflected immediately in the nominal exchange rate, set as it is in a forward… Expand
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