This paper proposes a new explanation for the greater variability of real exchange rates under pegged than under floating nominal exchange rate systems. The explanation hinges on the propensity of governments to use international trade restrictions and financial restrictions for...

Economic theory predicts connections between fluctuations in a country's exchange rate and its real GDP relative to other countries. Past evidence of such connections has been very weak. An examination of periods of large or sustained changes in GDP (rather than small, temporary changes),...

This paper proposes a new explanation for the greater variability of real exchange rates under pegged than under floating nominal exchange rate systems. The explanation hinges on the propensity of governments to use international trade restrictions and financial restrictions for...

Media reports on foreign exchange rates are filled with discussions of “overvalued” or “undervalued” currencies. Stories in the financial press about changes in exchange rates frequently state that they affect international competitiveness and employment