Yunjong Wang: The purpose of this paper is to provide a new measure for gauging a country's currency or exchange rate instability. Before moving into the technical issues related to the proposed measure, I would like to raise the question of whether the exchange rate variability is bad or not. Simply speaking, two views exist on this question. The first view is that exchange rate variability is inevitable, if the country chooses the free or managed floating system. The country must live with exchange rate fluctuations. Such exchange rate movements send the correct price signals when there is something wrong in the economy or, more specifically, the balance of payments. Thus, exchange rate variability is simply the reflection of economic shocks in the underlying fundamentals. Non-fundamental volatility, so-called noise, simply disappears in the models with rational expectations. Thus, any attempt to manage the exchange rate variability without curing the fundamental...
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October 01 2018
Comments by Yunjong Wang, on Sustainable Development and Currency Exchange Rate Behavior
Online ISSN: 1536-0083
Print ISSN: 1535-3516
© 2018 by the Asian Economic Panel and the Massachusetts Institute of Technology
Massachusetts Institute of Technology
Asian Economic Papers (2018) 17 (3): 174–176.
Comments by Yunjong Wang, on Sustainable Development and Currency Exchange Rate Behavior. Asian Economic Papers 2018; 17 (3): 174–176. doi: https://doi.org/10.1162/asep_a_00645
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