World trade patterns,economic disturbances,and exchange-rate management

This paper construct and analyzes a three-country stochastic model of world trade. the objectives of this paper are to investigate the propagation of economic disturbances worldwide and to analyze the nature of optimal exchange-rate management on the part of a single country faced with monetary and real disturbances accurring in all its trade patterns. The paper analyzes the roles of bilateral trade patterns, the type of underlying stochastic disturbances i.e. monetary vs real and transsitory vs permanent and of the optimality criterion, in determining the optimal exchange-rate regime.