Social and Behavioral Sciences Commons^™

Insulation Of Small Open Economies In The Presence Of External Disturbances Under Alternative Exchange Rate Systems, Hamid Reza Azad

All Graduate Theses and Dissertations, Spring 1920 to Summer 2023

This study analyzes the determination of the exchange rate system in a small economy when external real and monetary disturbances occur. Choice of exchange rate policy is investigated using a model assuming rational expectations and a loss function expressing the squared deviations of the small country output from desired output. The distinguishing feature of the analysis is the emphasis on real as well as monetary disturbances which originate abroad but are a source of domestic output variation. the link between foreign monetary and real disturbances and variance in output is traced using the thoretical model and the loss function assumed. …