Currency mismatches and monetary policy: A tale of two equilibria

• 成果类型: Article; Proceedings Paper
• 署名作者: Chang, R; Velasco, A
• 署名单位: Rutgers University System; Rutgers University New Brunswick; Harvard University
• 刊物名称: JOURNAL OF INTERNATIONAL ECONOMICS
• ISSN/ISSBN: 0022-1996
• DOI: 10.1016/j.jinteco.2005.05.008
• 发表日期: 2006
• 页码: 150-175
• 关键词: Exchange rates; Currency mismatches; Liability dollarization; fear of floating

摘要

We develop a model of a small economy whose residents choose whether to borrow in domestic or foreign currency. The central bank, in turn, chooses fixed or flexible exchange rates, taking the currency denomination of debts as given. We characterize the simultaneous determination of portfolios and exchange rate regime. Both floating and fixed rates can occur as equilibrium outcomes. Fear of floatine may emerge endogenously and in association With a currency mismatch in assets and liabilities. If equilibria with both fixed rates and floating rates coexist, the latter is Pareto superior. Lessons for current de-dollarization proposals are discussed. (c) 2005 Elsevier B.V. All rights reserved.