THE POLITICAL ECONOMY OF EXCHANGE RATES by Broz and Frieden

THE POLITICAL ECONOMY OF EXCHANGE RATES by Broz and...

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THE POLITICAL ECONOMY OF EXCHANGE RATES by  Broz and   Frieden The international political economy of exchange rate policy Two Ideals of international monetary regimes: 1) Fixed-rate system 2) Free floating :national currency values vary with market conditions and national macroeconomic policies. -Under “adjustable peg” system (after WWI to 1970s) , currencies were not as firmly fixed as under the classical gold standard. -Global or regional monetary systems are the result of interaction among national exchange rate policies. -Pareto improving Nash equilibrium (often more than one): countries want to choose the same currency regime but may disagree over which one to choose. -Pareto inferior Nash equilibrium: cooperation involves interaction among governments to adjust policies consciously to support each other- such as joint intervention in currency markets. - Nash bargaining solution: Prisoners Dilemma; counties can work together to improve their collective and individual welfare. The two problems are not mutually
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This note was uploaded on 04/28/2011 for the course POLI 243 taught by Professor Markbrawley during the Spring '09 term at McGill.

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THE POLITICAL ECONOMY OF EXCHANGE RATES by Broz and...

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