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Welfare, Banks, and Capital Mobility in Steady State: The Case of Predetermined Exchange Rates

Authors
Disciplines
  • Design
  • Economics

Abstract

Welfare, Banks, and Capital Mobility in Steady State: The Case of Predetermined Exchange Rates This PDF is a selection from an out-of-print volume from the National Bureau of Economic Research Volume Title: Economic Adjustment and Exchange Rates in Developing Countries Volume Author/Editor: Sebastian Edwards and Liaquat Ahamed, eds. Volume Publisher: University of Chicago Press Volume ISBN: 0-226-18469-2 Volume URL: http://www.nber.org/books/edwa86-1 Publication Date: 1986 Chapter Title: Welfare, Banks, and Capital Mobility in Steady State: The Case of Predetermined Exchange Rates Chapter Author: Guillermo A. Calvo Chapter URL: http://www.nber.org/chapters/c7673 Chapter pages in book: (p. 175 - 200) Economic Reform, Foreign Shocks, and Exchange Rates This Page Intentionally Left Blank 5 Welfare, Banks, and Capital Mobility in Steady State: The Case of Predetermined Exchange Rates Guillermo A. Calvo 5.1 Introduction This paper explores a kind of “minimum framework” with which the role of banks, and particularly their welfare implications, can be examined. This topic of study is of undoubtedly great importance for modern economies, given the worldwide tendency to pursue relatively free banking, a phenomenon that has been unfolding perhaps more in response to the increase in the inflation rate of the leading currencies over the past decade-more by “economic necessity,” as it were- than in response to the thoughtful design of influential economists (see, however, McKinnon 1973, Sargent and Wallace 1981). The need to develop criteria to judge the different responses is par- ticularly salient in countries in which the movement toward a freer banking system has been associated with serious economic disruptions; examples of these are Argentina and Chile in recent years (see Diaz- Alejandro 1985). The relationship here is not necessarily one of cause and effect, but the fact that the two events went together represents for all practic

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