A look at ‘overshooting’ in a two-tier float exchange rate system |
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Authors: | Jagdeep S. Bhandari |
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Affiliation: | West Virginia University, Morgantown, WV 26506, USA |
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Abstract: | This note examines the celebrated ‘overshooting’ hypothesis in the context of a two-tier float exchange rate regime. It is shown that monetary expansion leads to depreciation of both spot exchange rates and there is a presumption in favor of financial exchange rate ‘overshooting’. |
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