GTAP Resources: Resource Display
| GTAP Resource #1852 |
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"Economic Consequences of Alternative Exchange Rate and Monetary Policy Regimes in Canada" by Macklem, Tiff, Patrick Osakwe, Hope Pioro and Lawrence Schembri Abstract This paper uses a stochastic Dynamic General Equilibrium Model to analyze the economic and welfare consequences for Canada of two alternative exchange rate and monetary policy rules: a flexible exchange rate regime with a price-level target and a permanently fixed exchange rate regime, which might occur with the formation of a North American monetary union. The model is calibrated to Canadian data and then simulated to determine the impact of term-of-trade shocks on key macroeconomic variables under the two regimes. The main finding of the paper is that employment, output, and consumption are much more volatile under a fixed exchange rate. Because agents are risk-averse, this volatility has significant welfare costs. The study also shows that transactions costs would have to be implausibly high and agents almost risk neutral for the welfare advantage of a flexible exchange rate to disappear. |
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Public Access  GTAP Resource 1852 (123.6 KB) Replicated: 0 time(s)Restricted Access No documents have been attached. Special Instructions No instructions have been specified. |
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Last Modified: 9/15/2023 2:05:45 PM
