11-03-10-Foreign Inflation-a %281%29

11-03-10-Foreign Inflation-a %281%29 - F or eign I nflat...

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Unformatted text preview: F or eign I nflat ion Under A lt er nat ive Exchange Rat es M ar ch 10, 2011 CA STI G Economy Starts In Equilibrium LMms=5 STI G Q 0 1 p CA pf=0,e=.4 CA STI G LMms=5 STI G 18.75 0 Q 1 1.075 1. 1 p CA pf=.1,e=.4 Foreign Inflation Of .1 Shifts CA To The Right By .1 CA STI G LM’ms=5.075 STI G 18.75 0 Q 1 1.075 1. 1 p CA pf=.1,e=.4 The Fixed-Exchange-Rate Resolution Is To Shift LM To The Right CA STI G LMms=5 STI G Q 0 1 p CA pf=.1,e=.3 The Flexible-Exchange-Rate Resolution Is To Shift CA Back To Its Original Position ...
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11-03-10-Foreign Inflation-a %281%29 - F or eign I nflat...

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