TY - JOUR
T1 - Floating exchange rates with liquidity constraints in financial markets
AU - Helpman, Elhanan
AU - Razin, Assaf
N1 - Funding Information:
Although these motives for holding money are most important, those studies shed no light on a phenomenon that is widely discussed in international macroeconomics, the role of different currency denominated assets in exchange rate determination. They could not deal with this issue because *We wish to thank the Social Science Research Council for the Fulbright Grant that financed this research, and Torsten Persson and Lars Svensson for comments on a preliminary draft. This is a revised version of Foerder Institute of Economic Research Working Paper No. 38-83.
PY - 1985/8
Y1 - 1985/8
N2 - We construct a two-country model in which there exist cash in advance constraints in commodity as well as in asset markets. The seller's currency is used for transactions in commodity markets and the lender's money is used for transactions in the bond markets. The exchange rate equation that emerges from this structure has a new feature - it exhibits a bias towards depreciation of the borrowers' currency. We describe the equilibrium dynamics of this type of a world economy and show that it may exhibit cyclical movements.
AB - We construct a two-country model in which there exist cash in advance constraints in commodity as well as in asset markets. The seller's currency is used for transactions in commodity markets and the lender's money is used for transactions in the bond markets. The exchange rate equation that emerges from this structure has a new feature - it exhibits a bias towards depreciation of the borrowers' currency. We describe the equilibrium dynamics of this type of a world economy and show that it may exhibit cyclical movements.
UR - http://www.scopus.com/inward/record.url?scp=0039921759&partnerID=8YFLogxK
U2 - 10.1016/0022-1996(85)90021-2
DO - 10.1016/0022-1996(85)90021-2
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AN - SCOPUS:0039921759
SN - 0022-1996
VL - 19
SP - 99
EP - 117
JO - Journal of International Economics
JF - Journal of International Economics
IS - 1-2
ER -