FK said to reporters the exchange rate will go to 2,80 before coming back to 2,40. Since he is in touch with Delfos, I will buy some greens.
He mentioned overshooting. What causes this strange phenomenon?
Sticky prices.
Govt increases M;
P does not move immediately but begins to rise slowly;
Due to the above M/P will decrease from t=0 levels; then interest rates will rise all the way from extremely initial depressed levels until steady state.
The exchange rate has to appreciate during the trajectory; because interest is increasing, right?
But how to reconcile a more depreciated exchange rate in the new s.state with a dynamics in which the exchange rate appreciates until the new equilibtium??
OVERSHOOTING !
ps. when he was young, i taught FK this.
Dornbusch's overshooting is pretty cool.
ResponderExcluirJust a simple question: does studying advanced international trade end up paying off or do you regard it to be a dead field within economics?
Wow, you did a Macgyver in the last dynamics... The dumb readers of The Big State will ever realize the magic, they have just taken such a smart advice and gone quickly to buy greens.
ResponderExcluirFK, you have more power than the BCB to rock markets.
Queria muito que o Antoninho voltasse a postar.
ResponderExcluir