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37 p, 472.4 KB

The case for flexible exchange rates in a great recession / Corsetti, Giancarlo ; Kuester, Keith
We analyze macroeconomic stabilization in a small open economy which faces a large recession in the rest of the world. We show analytically that for the economy to remain isolated from the external shock, the exchange rate must depreciate not only to offset the collapse in external demand, but also to decouple domestic prices from the deflation in the rest of the world. [...]
The ADEMU Working Paper Series is being supported by the European Commission Horizon 2020 European Union funding for Research & Innovation, grant agreement No 649396.
2016 (ADEMU Working Paper Series ; 24)

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