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Faculty of Economics

Prof. Giancarlo Corsetti "In a Great Recession, the case for Flexible Exchange Rates is Alive and Well"

Professor Giancarlo Corsetti, Gernot Müller and Keith Kuester's article "In a Great Recession, the case for flexible exchange rates is alive and well" has been published on the VoxEU website..

The classic rationale for flexible exchange rates was that policymakers would be unconstrained by currency targets. The Great Recession, however, saw numerous central banks constrained instead by the zero lower bound. This column considers which exchange rate regime is best for small open economies in a global recession. The model suggests that if the source of the shock is abroad and foreign interest rates become constrained at their zero lower bound, then flexible exchange rates do provide a great deal of insulation to the domestic economy.

Link to Article please click here.

Published on - Wednesday 20th September 2017

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