number of studies have contended that it is challenging to explain exchange rate movement with macroeconomic fundamentals. A naive model such as a random walk forecasts exchange rate movements more reliably than existing structural models. This paper confirms that it is possible to improve the...

Using a simple pure-exchange overlapping generations model characterized by financial repression, purposeful government expenditures and cost of tax collection, we analyze whether financial repression can be explained by the cost of raising taxes. We show that with public expenditures affecting...