Prospects for Exchange Rate Stabilization
{'Code': '04050100', 'Directorate': {'Abbreviation': 'SBE', 'LongName': 'Direct For Social, Behav & Economic Scie'}, 'Division': {'Abbreviation': 'SES', 'LongName': 'Divn Of Social and Economic Sciences'}}
{'SignBlockName': 'Daniel H. Newlon', 'PO_EMAI': None, 'PO_PHON': None}
This project is part of an effort to rigorously model and                       empirically study the performance of the global economy.  The                   project examines three subjects: (1) the likely behavior of                     exchange rates under a system of reference rates and target                     zones; (2) the long-term effects of large exchange rate movements               on trade flows; and (3) the possible existence of sustained                     secular trends in equilibrium real exchange rates.                                                                                                              Some aspects of movements in exchange rates during the eighties                 puzzle policy makers and challenge the large body of theory on                  international finance and trade.  Why were there wild fluctations               in the value of the dollar during this period?  More generally,                 why were exchange rates so volatile under a regime of floating                  exchange rates?  Why have trade flows been so slow to respond to                exchange rate movements?  Specifically, why has the sharp decline               in the dollar from 1985 to the present not had more of an impact                on U.S. trade flows?  Finally, why do the terms of trade of the                 U.S. towards Japan keep deteriorating year after year?                                                                                                          This project takes international economics in new directions that               could answer these questions and suggest new policy tools for                   dealing with U.S. problems in international trade and finance.                  Exchange rate volatility is explained by modelling the way                      changes in the beliefs of market participants can increase the                  volatility of international financial markets.  The project                     develops and extends theoretically a framework in which the                     belief by market participants that authorities may intervene to                 prevent the exchange rate from drifting outside a target zone                   exerts a strong stabilizing influence on exchange rates within                  the band.  This framework is the basis for an examination of the                experience with the European Monetary System (EMS), the nearest                 thing to a target zone system.  Preliminary work suggests that                  the EMS has been unexpectedly successful at stabilizing European                exchange rates.                                                                                                                                                 An "hysterisis" model, a model in which short-run shocks cause                  long-run effects, is used to explain why the U.S. economy did not               rebound as rapidly as predicted when the dollar started to                      decline in 1985.  The U.S. economy is not as competitive as                     expected now because of quasi-permanent damage suffered when the                dollar was overvalued in the early eighties.  Finally, supply                   side differences in the industrial structures among countries                   could explain apparent strong secular trends in the terms-of-                   trade.
{'FirstName': 'Paul', 'LastName': 'Krugman', 'PI_MID_INIT': 'R', 'PI_SUFX_NAME': None, 'PI_FULL_NAME': 'Paul R Krugman', 'EmailAddress': None, 'NSF_ID': '000124726', 'StartDate': '07/15/1988', 'EndDate': None, 'RoleCode': 'Principal Investigator'}
{'Name': 'National Bureau of Economic Research Inc', 'CityName': 'CAMBRIDGE', 'ZipCode': '021385359', 'PhoneNumber': '6178683900', 'StreetAddress': '1050 MASSACHUSETTS AVE', 'StreetAddress2': None, 'CountryName': 'United States', 'StateName': 'Massachusetts', 'StateCode': 'MA', 'CONGRESSDISTRICT': '05', 'CONGRESS_DISTRICT_ORG': 'MA05', 'ORG_UEI_NUM': 'GT28BRBA2Q49', 'ORG_LGL_BUS_NAME': 'NATIONAL BUREAU OF ECONOMIC RESEARCH INC', 'ORG_PRNT_UEI_NUM': None}
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{'Code': '1320', 'Text': 'Economics'}
{'url': 'https://www.nsf.gov/awardsearch/download?DownloadFileName=1988&All=true', 'xml': '8809800.xml'}