exchange rate overshooting pdf

Full text (submitted version) (PDF, 179.2Kb) Open access. 43 0 obj (Terms and Concepts) /Widths[277.8 500 833.3 500 833.3 777.8 277.8 388.9 388.9 500 777.8 277.8 333.3 277.8 EXCHANGE RATE OVERSHOOTING Figure 1.1: Rudiger Dornbush (1942-2002) real exchange rate. endobj 639.7 565.6 517.7 444.4 405.9 437.5 496.5 469.4 353.9 576.2 583.3 602.5 494 437.5 /Widths[1062.5 531.3 531.3 1062.5 1062.5 1062.5 826.4 1062.5 1062.5 649.3 649.3 1062.5 277.8 500] /Widths[249.6 458.6 772.1 458.6 772.1 719.8 249.6 354.1 354.1 458.6 719.8 249.6 301.9 16 0 obj 324.7 531.3 531.3 531.3 531.3 531.3 795.8 472.2 531.3 767.4 826.4 531.3 958.7 1076.8 /Subtype/Type1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 963 379.6 963 638.9 963 638.9 963 963 489.6 489.6 489.6 489.6 489.6 489.6 489.6 489.6 489.6 489.6 272 272 272 761.6 462.4 /Name/F6 << /S /GoTo /D (subsection.1.4.3) >> /Type/Font /Type/Font /FirstChar 33 /BaseFont/EDFKMG+CMMI8 Real Exchange Rate Overshooting in Large Depreciations: Determinants and Consequences. endobj In this paper we analyze the determinants of the evolution of ex- change rates within the context of alternative models of exchange rate dynamics. /Encoding 7 0 R 7 0 obj >> Exchange rate overshooting explains the daily behaviour of exchange rates. (Forward Rates) %���� Author/Editor: Alexander Culiuc. /FontDescriptor 12 0 R Suppose the Bank of Canada embarks on an unanticipated monetary expansion at time t*. 20 0 obj We find some evidence to suggest that non-market factors continue to play a role in influencing the exchange rate, although many of the vulnerabilities typically associated with rupiah movements appear to have declined. The paper is structured as follows. 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 663.6 885.4 826.4 736.8 /Subtype/Type1 /BaseFont/PAWTSG+CMR8 endobj (The Long Run In Sticky-Price Models) << endobj 708.3 795.8 767.4 826.4 767.4 826.4 0 0 767.4 619.8 590.3 590.3 885.4 885.4 295.1 << /S /GoTo /D (subsection.1.4.1) >> 60 0 obj 66 0 obj 388.9 1000 1000 416.7 528.6 429.2 432.8 520.5 465.6 489.6 477 576.2 344.5 411.8 520.6 Empirically, Mark (1995), Chinn and Meese (1995), and Mark and Sul (1999) show that long-horizon exchange rate movements are determined by economic fundamentals such as relative money stocks and relative real incomes: stochastic processes that are quite persistent. /FirstChar 33 48 0 obj Q = P / Π P* When Π goes up, foreign currency costs more in terms of domestic currency and the value of domestic goods in terms of foreign goods, represented by Q , falls. 75 0 obj Volume Publisher: University of Chicago Press ... phenomenon of exchange rate “overshooting” in response to monetary dis- The overshooting model, or the exchange rate overshooting hypothesis, first developed by economist Rudi Dornbusch, is a theoretical explanation for high levels of exchange rate volatility. 720.1 807.4 730.7 1264.5 869.1 841.6 743.3 867.7 906.9 643.4 586.3 662.8 656.2 1054.6 /Widths[295.1 531.3 885.4 531.3 885.4 826.4 295.1 413.2 413.2 531.3 826.4 295.1 354.2 Dornbusch’s exchange rate overshooting marks the birth of the modern international economics. Irrespective of the importance of this prodigy, not enough studies specifically in the African context have been conducted. /FontDescriptor 9 0 R 693.3 563.1 249.6 458.6 249.6 458.6 249.6 249.6 458.6 510.9 406.4 510.9 406.4 275.8 endobj endobj Use the free Adobe Acrobat Reader to view this PDF file /Length 1467 /FontDescriptor 39 0 R Overshooting and exchange rate exposure: The more open the economy and the greater the exchange rate pass-through, the smaller is the magnitude and the more delayed is the exchange rate overshooting. exchange rate will be stable at some level like e 0, as it is in Figure 1 up to time t*. �8*�>o��&A�ۑ)�E�����r(��0�(��AU�N8��2��ZUovX��i�����@9��l�V�Gc{���FZ��@����$�dH� �[email protected]�����. endobj This study re-examines the validity of the overshooting hypothesis by using the autoregressive distributed lag (ARDL) procedure. << 19 0 obj << /S /GoTo /D (subsection.1.6.3) >> 34 0 obj 500 500 611.1 500 277.8 833.3 750 833.3 416.7 666.7 666.7 777.8 777.8 444.4 444.4 (Can We See the CIPRE Relationship?) 820.5 796.1 695.6 816.7 847.5 605.6 544.6 625.8 612.8 987.8 713.3 668.3 724.7 666.7 86 0 obj 542.4 542.4 456.8 513.9 1027.8 513.9 513.9 513.9 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 endobj Driskill (1981), Bhandari (1985), Akiba (1996), Kolmann (1997), Goldfajn and Gubta (2001), Papell (2004) and Nieh and Wang (2005) affirmed Dornbusch with empirical results. • Overshooting is predicted to occur when monetary policy has an immediate effect on interest rates, but not on prices and (expected) inflation. The model highlights a key tradeoff when considering fixed versus flexible exchange rate regimes; a fixed exchange regime can, by avoiding exchange rate overshooting, mitigate the negative wealth effect but at the cost of additional distortions and output drops in the short run. 15 0 obj 756.4 705.8 763.6 708.3 708.3 708.3 708.3 708.3 649.3 649.3 472.2 472.2 472.2 472.2 Even in the absence of any major news, exchange rates adjust through the day as foreign exchange dealers manage their inventories and respond to … 500 555.6 527.8 391.7 394.4 388.9 555.6 527.8 722.2 527.8 527.8 444.4 500 1000 500 24 0 obj Effect consequently slows down the overshooting mechanism, compared to the. endobj (VAR Analysis) /BaseFont/TNSQSZ+CMSY8 777.8 777.8 1000 500 500 777.8 777.8 777.8 777.8 777.8 777.8 777.8 777.8 777.8 777.8 1222.2 1222.2 963 365.7 1222.2 833.3 833.3 1092.6 1092.6 0 0 703.7 703.7 833.3 638.9 << Section 3 presents a basic model of overshooting and our numerical results. 0 0 0 0 0 0 0 615.3 833.3 762.8 694.4 742.4 831.3 779.9 583.3 666.7 612.2 0 0 772.4 stream << (Exchange Rate Overshooting) 249.6 458.6 458.6 458.6 458.6 458.6 458.6 458.6 458.6 458.6 458.6 458.6 249.6 249.6 /LastChar 196 /BaseFont/SFUOBC+CMBX12 >> Get PDF (458 KB) Abstract. Overshooting, also known as the overshooting model, or the exchange rate overshooting hypothesis, is a way to think about and explain high levels of volatility in exchange rates. 40 0 obj 62 0 obj 458.6 458.6 458.6 458.6 693.3 406.4 458.6 667.6 719.8 458.6 837.2 941.7 719.8 249.6 endobj Hence, the study aims to investigate the validity of the overshooting hypothesis in a panel of African countries. the overshooting of the exchange rates between India and Bangladesh. /FirstChar 33 /BaseFont/XSZIEB+CMMI10 (Unanticipated Policy Shocks) /LastChar 196 /Widths[342.6 581 937.5 562.5 937.5 875 312.5 437.5 437.5 562.5 875 312.5 375 312.5 95 0 obj endobj 42 0 obj /Name/F4 endobj /LastChar 196 /FontDescriptor 18 0 R /Encoding 7 0 R This can be seen from our definition of the real exchange rate in Equation 1. 708.3 708.3 826.4 826.4 472.2 472.2 472.2 649.3 826.4 826.4 826.4 826.4 0 0 0 0 0 << 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 576 772.1 719.8 641.1 615.3 693.3 Author 491.3 383.7 615.2 517.4 762.5 598.1 525.2 494.2 349.5 400.2 673.4 531.3 295.1 0 0 /LastChar 196 295.1 531.3 531.3 531.3 531.3 531.3 531.3 531.3 531.3 531.3 531.3 531.3 295.1 295.1 endobj /Name/F9 /Subtype/Type1 742.3 799.4 0 0 742.3 599.5 571 571 856.5 856.5 285.5 314 513.9 513.9 513.9 513.9 endobj 471.5 719.4 576 850 693.3 719.8 628.2 719.8 680.5 510.9 667.6 693.3 693.3 954.5 693.3 (Money Market Considerations) Expectations and Exchange-rate overshooting 3. the United States. /Encoding 7 0 R (Simple Empirical Considerations) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 826.4 295.1 826.4 531.3 826.4 endobj /FontDescriptor 21 0 R 173/Omega/ff/fi/fl/ffi/ffl/dotlessi/dotlessj/grave/acute/caron/breve/macron/ring/cedilla/germandbls/ae/oe/oslash/AE/OE/Oslash/suppress/dieresis 750 708.3 722.2 763.9 680.6 652.8 784.7 750 361.1 513.9 777.8 625 916.7 750 777.8 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 642.9 885.4 806.2 736.8 /Name/F5 /Name/F7 /Name/F2 endobj 23 0 obj 67 0 obj 694.5 295.1] endobj endobj Yet the limited magnitude of the liquidity effect after the first period translates into a weak exchange rate overshooting. << /S /GoTo /D (subsection.1.1.3) >> (The Algebra of Overshooting) 295.1 531.3 531.3 531.3 531.3 531.3 531.3 531.3 531.3 531.3 531.3 531.3 531.3 295.1 Keywords: Dornbusch overshooting hypothesis, Exchange rate, Macro-economic policy 1. /FirstChar 33 777.8 777.8 1000 1000 777.8 777.8 1000 777.8] 28 0 obj 285.5 799.4 485.3 485.3 799.4 770.7 727.9 742.3 785 699.4 670.8 806.5 770.7 371 528.1 /Filter[/FlateDecode] exchange rate overshooting, balance sheet exposure and output contraction during crisis episodes and establishes their links through a simultaneous equation estimation. 78 0 obj /FirstChar 33 /Encoding 7 0 R /Widths[1222.2 638.9 638.9 1222.2 1222.2 1222.2 963 1222.2 1222.2 768.5 768.5 1222.2 10 0 obj (Problems for Review) /FirstChar 33 27 0 obj /Widths[1000 500 500 1000 1000 1000 777.8 1000 1000 611.1 611.1 1000 1000 1000 777.8 1002.4 873.9 615.8 720 413.2 413.2 413.2 1062.5 1062.5 434 564.4 454.5 460.2 546.7 %PDF-1.2 /Name/F1 /Encoding 7 0 R endobj 571 285.5 314 542.4 285.5 856.5 571 513.9 571 542.4 402 405.4 399.7 571 542.4 742.3 endobj /Subtype/Type1 31 0 obj 249.6 719.8 432.5 432.5 719.8 693.3 654.3 667.6 706.6 628.2 602.1 726.3 693.3 327.6 826.4 826.4 826.4 826.4 826.4 826.4 826.4 826.4 826.4 826.4 1062.5 1062.5 826.4 826.4 The exchange rate adjustment to its new steady-state is all the slower as the interest rate differential is persistent. This PDF is a selection from an out-of-print volume from the National Bureau of Economic Research Volume Title: Exchange Rate Theory and Practice Volume Author/Editor: John F. O. Bilson and Richard C. Marston, eds. endobj In general, exchange rate overshooting explains the mechanism whereby the short-run response of the exchange rate to a shock exceeds its long-run response. 4 0 obj (Anticipated Shocks) /FontDescriptor 27 0 R 777.8 694.4 666.7 750 722.2 777.8 722.2 777.8 0 0 722.2 583.3 555.6 555.6 833.3 833.3 /Name/F11 >> 799.2 642.3 942 770.7 799.4 699.4 799.4 756.5 571 742.3 770.7 770.7 1056.2 770.7 Dornbusch’s (1976) well known exchange rate overshooting hypothesis is a central building block in international macroeconomics; stating that an increase in the interest rate should cause the nominal exchange rate to appreciate instantaneously, for then to depreciate in … 2 LECTURE NOTES 1. 16 0 obj 8 0 obj 883.7 823.9 884 833.3 833.3 833.3 833.3 833.3 768.5 768.5 574.1 574.1 574.1 574.1 << /FontDescriptor 15 0 R /FontDescriptor 33 0 R 343.8 593.8 312.5 937.5 625 562.5 625 593.8 459.5 443.8 437.5 625 593.8 812.5 593.8 90 0 obj >> 510.9 484.7 667.6 484.7 484.7 406.4 458.6 917.2 458.6 458.6 458.6 0 0 0 0 0 0 0 0 656.3 625 625 937.5 937.5 312.5 343.8 562.5 562.5 562.5 562.5 562.5 849.5 500 574.1 35 0 obj 0 0 0 0 0 0 0 0 0 0 0 0 675.9 937.5 875 787 750 879.6 812.5 875 812.5 875 0 0 812.5 /LastChar 196 << 734 761.6 666.2 761.6 720.6 544 707.2 734 734 1006 734 734 598.4 272 489.6 272 489.6 0U�R�xc^��̢CQzcZ=P�` " 675.9 1067.1 879.6 844.9 768.5 844.9 839.1 625 782.4 864.6 849.5 1162 849.5 849.5 500 500 500 500 500 500 500 500 500 500 500 277.8 277.8 277.8 777.8 472.2 472.2 777.8 g�S�<. 70 0 obj 465 322.5 384 636.5 500 277.8 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 /Name/F8 v��'eGqΎ\'��_�TIV���c�Kq���{��i��a�;-m��o6[m�O���B�����F��ꀐ�:M������Tel��?خ�G�����en&B�P��P�~YHS��*�)���6����=�Sk;rb��Xx�ŧj�S�N3�3xMj��v��5�M{Y.|�R���[�%��8�R_�� m�|]�Wk�:K�ʁJ�{��C(�Yv�b$��]\�/����d�W&��a,��W^��^4��.� z��K}�������u��qr{�Ȼ��8I#�(F�]��# �h���o\ϺR�������13���F^\톾���Lz:�q]�X�Ĥ�Ȉ���N�2s�JŻ�����q��� It is informed by the Dornbusch model of exchange rate overshooting. 593.8 500 562.5 1125 562.5 562.5 562.5 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 /LastChar 196 << /S /GoTo /D (section.1.5) >> (Regressive Expectations) 2. << /S /GoTo /D (subsection.1.3.1) >> << 783.4 872.8 823.4 619.8 708.3 654.8 0 0 816.7 682.4 596.2 547.3 470.1 429.5 467 533.2 endobj endobj >> >> 25 0 obj >> 833.3 833.3 963 963 574.1 574.1 574.1 768.5 963 963 963 963 0 0 0 0 0 0 0 0 0 0 0 >> 285.5 513.9 513.9 513.9 513.9 513.9 513.9 513.9 513.9 513.9 513.9 513.9 285.5 285.5 ���^ 6U The theory predicts that a contractionary monetary policy shock should lead to on impact appreciation of the exchange rate (overshooting) and thereafter depreciation … MONETARY POLICY WITH OVERSHOOTING EXCHANGE RATES 285 Exhibit 2: Trends of the Swiss inflation rate, interest rate and forward discount US Switzerland Difference Inflation rate (percentage change in Consumer Price Index, IV 77 - IV 78) 9.3 0.7 8.6 Exchange Rate Real Exchange Rate Nominal Exchange Rate Domestic Currency Exchange Rate Movement These keywords were added by machine and not by the authors. 47 0 obj /Filter /FlateDecode /BaseFont/GNYPFU+CMR17 << << /S /GoTo /D (section.1.3) >> endobj 255/dieresis] 444.4 611.1 777.8 777.8 777.8 777.8 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 295.1 826.4 531.3 826.4 531.3 559.7 795.8 801.4 757.3 871.7 778.7 672.4 827.9 872.8 J�Y�q��U.���ȉO� ��#n�~�Z`�K�L�A%�ww�!� Electronic Access: Free Download. 13 0 obj 413.2 590.3 560.8 767.4 560.8 560.8 472.2 531.3 1062.5 531.3 531.3 531.3 0 0 0 0 489.6 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 611.8 816 (Overshooting with Sticky Prices) 513.9 770.7 456.8 513.9 742.3 799.4 513.9 927.8 1042 799.4 285.5 513.9] /BaseFont/MCMSNV+CMR10 /LastChar 196 >> Following the exchange rate overshooting model of Dornbusch, many studies were conducted by several economists in this regard. 91 0 obj 3.3.2. /LastChar 196 Section 2 highlights the importance of future expected monetary policy on exchange rate dynamics. 12 0 obj /BaseFont/GZQYDS+CMR9 << /S /GoTo /D (subsection.1.6.1) >> 19 0 obj /Type/Font /Name/F3 277.8 305.6 500 500 500 500 500 750 444.4 500 722.2 777.8 500 902.8 1013.9 777.8 /FirstChar 33 Publication Date: May 22, 2020 . << /FirstChar 33 endobj [!�Œ��E*A����~��De�#����Ѝ�@�q�x�5Ps �T&�V�]o�A�r|��o4�g�+�+��2G����:���ti;�9.Jm|#��)�um��! endobj 71 0 obj /LastChar 196 << /S /GoTo /D [92 0 R /Fit] >> << /S /GoTo /D (section.1.2) >> >> endobj exchange rate overshooting but also the ‘Dutch disease’, exchange rate regime choice and commodity price volatility. 846.3 938.8 854.5 1427.2 1005.7 973 878.4 1008.3 1061.4 762 711.3 774.4 785.2 1222.7 1062.5 826.4] n�]�� �a�m��P��e˙������$``����t2��d��M%f�'p9�Gz��#p�[email protected]`��Aq�_��>X��^�RO����f�@u�)�( ��90_�;ӳ�t`� �� $���"�N��f���0���(�0\-Sv�8 ��&Jc�%ap~=�@���l:׫n�|A�A �"Y��Z9%WV�آ��5��x����[��sTB[ 82 0 obj endobj << /S /GoTo /D (section*.22) >> 74 0 obj 761.6 272 489.6] This mechanism may help to explain overshooting of exchange rates in the 1997 Asian financial crisis. In the short run, when extra‐marginal projects are “stuck” in the economy, the real exchange rate can overshoot. 11 0 obj << /S /GoTo /D (subsection.1.6.2) >> /FirstChar 33 << /S /GoTo /D (section.1.5) >> Section 4 concludes. /Subtype/Type1 /Type/Font 544 516.8 380.8 386.2 380.8 544 516.8 707.2 516.8 516.8 435.2 489.6 979.2 489.6 489.6 761.6 679.6 652.8 734 707.2 761.6 707.2 761.6 0 0 707.2 571.2 544 544 816 816 272 963 963 1222.2 1222.2 963 963 1222.2 963] In such a setting, the Canadian–U.S. 0 0 0 0 0 0 0 0 0 0 777.8 277.8 777.8 500 777.8 500 777.8 777.8 777.8 777.8 0 0 777.8 /BaseFont/HKMCXJ+CMR12 795.8 795.8 649.3 295.1 531.3 295.1 531.3 295.1 295.1 531.3 590.3 472.2 590.3 472.2 endobj 531.3 826.4 826.4 826.4 826.4 0 0 826.4 826.4 826.4 1062.5 531.3 531.3 826.4 826.4 275 1000 666.7 666.7 888.9 888.9 0 0 555.6 555.6 666.7 500 722.2 722.2 777.8 777.8 /FontDescriptor 30 0 R 37 0 obj 812.5 875 562.5 1018.5 1143.5 875 312.5 562.5] 458.6 510.9 249.6 275.8 484.7 249.6 772.1 510.9 458.6 510.9 484.7 354.1 359.4 354.1 79 0 obj endobj /Encoding 7 0 R 667.6 719.8 667.6 719.8 0 0 667.6 525.4 499.3 499.3 748.9 748.9 249.6 275.8 458.6 /FirstChar 33 /Widths[272 489.6 816 489.6 816 761.6 272 380.8 380.8 489.6 761.6 272 326.4 272 489.6 83 0 obj endobj 898.1 898.1 963 963 768.5 989.9 813.3 678.4 961.2 671.3 879.9 746.7 1059.3 709.3 /Type/Font 462.4 761.6 734 693.4 707.2 747.8 666.2 639 768.3 734 353.2 503 761.2 611.8 897.2 638.9 638.9 509.3 509.3 379.6 638.9 638.9 768.5 638.9 379.6 1000 924.1 1027.8 541.7 /BaseFont/YOCZMW+CMSY6 324.7 531.3 590.3 295.1 324.7 560.8 295.1 885.4 590.3 531.3 590.3 560.8 414.1 419.1 55 0 obj /FontDescriptor 36 0 R (Covered Interest Parity with Regressive Expectations) endobj /Type/Font << << presented by exchange rate fluctuations in the post-crisis period. endobj 826.4 295.1 531.3] endobj 44 0 obj 272 272 489.6 544 435.2 544 435.2 299.2 489.6 544 272 299.2 516.8 272 816 544 489.6 Model M2 is indeed able to account for the nominal exchange rate overshooting. /Subtype/Type1 59 0 obj /Type/Font 7 0 obj << /S /GoTo /D (section.1.6) >> Purchasing power parity failed to provide a helpful short-run guide to understanding exchange rates. 562.5 562.5 562.5 562.5 562.5 562.5 562.5 562.5 562.5 562.5 562.5 312.5 312.5 342.6 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 642.3 856.5 799.4 713.6 685.2 770.7 742.3 799.4 /LastChar 196 /Differences[33/exclam/quotedblright/numbersign/dollar/percent/ampersand/quoteright/parenleft/parenright/asterisk/plus/comma/hyphen/period/slash/zero/one/two/three/four/five/six/seven/eight/nine/colon/semicolon/exclamdown/equal/questiondown/question/at/A/B/C/D/E/F/G/H/I/J/K/L/M/N/O/P/Q/R/S/T/U/V/W/X/Y/Z/bracketleft/quotedblleft/bracketright/circumflex/dotaccent/quoteleft/a/b/c/d/e/f/g/h/i/j/k/l/m/n/o/p/q/r/s/t/u/v/w/x/y/z/endash/emdash/hungarumlaut/tilde/dieresis/Gamma/Delta/Theta/Lambda/Xi/Pi/Sigma/Upsilon/Phi/Psi/Omega/ff/fi/fl/ffi/ffl/dotlessi/dotlessj/grave/acute/caron/breve/macron/ring/cedilla/germandbls/ae/oe/oslash/AE/OE/Oslash/suppress/Gamma/Delta/Theta/Lambda/Xi/Pi/Sigma/Upsilon/Phi/Psi (Dornbusch \(1976\)) >> 56 0 obj 460.7 580.4 896 722.6 1020.4 843.3 806.2 673.6 835.7 800.2 646.2 618.6 718.8 618.8 /Length 1986 endobj 52 0 obj >> /Type/Font The theory predicts that a contractionary monetary policy shock (an increase in the domestic endobj Implementing a 'gradualist' policy of monetary contraction, in an open economy with a freely floating exchange rate but with nominal inertia in domestic labor costs, can lead to prompt and substantial changes in the nominal and real exchange rate. 762.8 642 790.6 759.3 613.2 584.4 682.8 583.3 944.4 828.5 580.6 682.6 388.9 388.9 endobj 767.4 767.4 826.4 826.4 649.3 849.5 694.7 562.6 821.7 560.8 758.3 631 904.2 585.5 endobj /Widths[622.5 466.3 591.4 828.1 517 362.8 654.2 1000 1000 1000 1000 277.8 277.8 500 ;����ܴ�&~����6&����pl����t��DKY�؁g�e+/�"I�G[i-i��ƈ����|��LS�&�H��M(��h[ ��,� B���t%�i ��[��Ɂ��>�X���`�q�%[ �LG�B�S���P����-���~�j�4�ۊ�"��s��M�Z��a2�}sӑ�gY��W�k�F�2���b�s,������a�D���b�k���MU�?�~��xc�0�e�O��?3��7����&�n�s�>��_��[�Q�]:� �y��x�O��K�е}g�Y|�������wk;�m�Ĩ|�5����/y�⟃;��t�7�M� endobj endobj 500 500 500 500 500 500 500 500 500 500 500 277.8 277.8 777.8 500 777.8 500 530.9 (Conclusion) /Subtype/Type1 rate regimes; a fixed exchange regime can, by avoiding exchange rate overshooting, mitigate the negative wealth effect but at the cost of additional distortions and output drops in the short run. 750 758.5 714.7 827.9 738.2 643.1 786.2 831.3 439.6 554.5 849.3 680.6 970.1 803.5 28 0 obj /Subtype/Type1 31 0 obj /Subtype/Type1 The exchange rate overshooting hypothesis widely known as the Dornbusch (1976) overshooting model holds a very imp ortant position in the modern international macroeconomics literature. 40 0 obj endobj 611.1 798.5 656.8 526.5 771.4 527.8 718.7 594.9 844.5 544.5 677.8 762 689.7 1200.9 680.6 777.8 736.1 555.6 722.2 750 750 1027.8 750 750 611.1 277.8 500 277.8 500 277.8 << 39 0 obj /FirstChar 33 666.7 666.7 666.7 666.7 611.1 611.1 444.4 444.4 444.4 444.4 500 500 388.9 388.9 277.8 stream Outline of Dornbusch Overshooting Hypothesis (DOH) The Dornbusch overshooting hypothesis (DOH) was first written as “Expectations and Exchange Rate Dynamics” by economist Rudiger Dornbusch and was published in the Journal of Political Economy in 1976. 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