Working Paper Number

2019-19

Journal or Book Title

UMass Amherst Economics Working Papers

Publication Date

2019

Abstract

Real exchange rate policy can potentially be utilized to target the trade balance and/or development through capital accumulation. However, the presence of distributional conflict and the trade-off between current and future trade imbalances complicates matters. I show that policy assignment matters for dynamic stability. Moreover, the relative saving behavior of different functional income groups influences dynamic behavior. The analysis sheds light on why real exchange rate policy may often be unfeasible, even if desirable from a developmental perspective.

License

UMass Amherst Open Access Policy

Included in

Economics Commons

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