Badinger, Harald, Kubin, Ingrid. 2008. AS-AD revisited: overshooting adjustment dynamics under naive expectations. Metroeconomica 59 (4): 574-593.
BibTeX
Abstract
We analyse the adjustment dynamics from a short-term to a medium-term equilibrium in a standard AS-AD model à la Blanchard (2006, Macroeconomics, 4th edn, Prentice-Hall, Upper Saddle River, NJ) for an open economy with fixed and flexible exchange rates. An explicit analysis suggests the local stability of the medium-term equilibrium. However, an overshooting adjustment dynamics is possible for the exchange rate, a result that directly relates to the famous Dornbusch (1976, Journal of Political Economy, 84, pp. 11611176) analysis. In contrast to the latter, in the Blanchard framework it is obtained without assuming rational expectations and without relying upon saddle-path stability.
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Status of publication | Published |
---|---|
Affiliation | WU |
Type of publication | Journal article |
Journal | Metroeconomica |
Citation Index | SSCI |
WU-Journal-Rating new | VW-D |
Language | English |
Title | AS-AD revisited: overshooting adjustment dynamics under naive expectations |
Volume | 59 |
Number | 4 |
Year | 2008 |
Page from | 574 |
Page to | 593 |
Reviewed? | Y |
Associations
- People
- Badinger, Harald (Details)
- Kubin, Ingrid (Details)
- Organization
- Europainstitut (Badinger)
(Former organization)
- Research Institute for International Taxation FI (Details)
- Department of Economics (Kubin) (Details)