bain_y_howells__monetary_economics__policy_and_its_theoretical_basis

310 MONETARY ECONOMICS
6. Show on a Mundell-Fleming diagram the impact of:
(a) a country revaluing its currency within a fixed exchange rate system;
(b) a decision to widen the exchange rate bands within a fixed exchange
rate system.
7. Memory test: What are hysteresis effects? Where are they mentioned in
this chapter? What point is made in relation to them?
8. Is the assumption in the Dornbusch model of sticky goods market prices
realistic? What about the other assumptions of the model?
9. What is the relationship between purchasing power parity and the neutrality
of money?
10. Memory test: what is the Lucas critique? Where is it referred to in this
chapter?
11.In what senses is:
(a) the Williamson-Miller target zone model Keynesian?
(b) the McKinnon fixed exchange rate model monetarist?
Further reading
The Mundell-Fleming model is dealt with at length in most second level
macroeconomics texts. It is particularly well used and discussed in
Acocella (1998). Textbooks that cover exchange rate economics well
include the third edition of Copeland (2000) and the second edition of
Pilbeam (1998). Most of the material on policy coordination dates from the
late 1980s and early 1990s, when it was rather more popular as a topic than
it has been recently. Recommended are the essays by Currie in Llewellyn
and Milner (1990) and by Hughes-Hallet in Greenaway (1989).