| One after another global economic crises have taken place since 1980s: Latin-American debt-repayment crisis in 80s, Western-European currency crisis in the early 90s, Mexican financial turbulence in the middle 90s, Southeastern-Asian Financial Crisis beginning at 1997, Latin-American financial turbulence, Russian crisis and Turkish turbulence at the turn of the century. Unprecedented influence of all these crises is wide and deep.Economists put forwards different theories to explain the sources of the crises, which involves every economic aspect, even deep into the politics and sociology. However they have a common feature--whatever the sources are, whatever the types are, exchange rate mechanism poses an important while disputed position. Then what role did exchange rate and its mechanism play in these crises?Exchange rate theory holds an unchallengeable basic position in the international macroeconomics. However, the research should start from several and complicated angles, and it is impossible to understand the exchange rate theory thoroughly from only one aspect. Therefore, the analytical angle the author chooses is based on the specific current problems and is chosen subjectively. The aim is not the generalization of the exchange rate theory, but just to find out a suggestive aspect to explain the real world.The insulating power of exchange rate, also known as the isolation power of exchange rate, refers to the degree of exchange rate to insulate impulsion on the economic system by the disturbances. In effect, it is another name of disturbance transmission mechanism of exchange rate called in the reverse way. It's the main advantage quoted to support the float exchange rate for so long time. This article just starts from thispoint to analyze the relation between the insulating power and the flexibility of exchange rate, and, moreover, to determine to what degree the insulating power influence the choice of exchange rate regime. Precisely, the problems this article makes effort to solve are as followings:First, what does insulation mechanism, that is, crisis transmission mechanism, look like? Does the insulating power of exchange rate depend on its flexibility?Second, can the impulsion effect of the disturbance be avoided by the scientific choice of exchange rate regime? How important is the international coordination of economic policy to stabilize domestic economy? What is the kind of relationship between institutional choice and policy coordination?The article consists of the following 4 parts:Part I Theoretic Summary and Analytical StructureAlthough the oppugn was advanced from the Harberger-Laursen- Meltzler effect in the 1950s, analysis on the transmission mechanism of exchange rate could be even traced to David Hume's sprice-specie-flow mechanism. Modern analyses are based on the Keynesian Model. Through the modification the Laursen-Meltzler model and the Mundell-Fleming Model and Dornbusch's summary and development, there comes into being the "Overshooting" model--more meaningful name is the Mundell-Fleming-Dornbusch model. Meanwhile, the Representative Agent Theory puts its emphasis on the micro aspect, that is, deducing the behavior relation in the macro-model through the micro-agent's intertemporal optimal behaviors. This makes the analysis on insulating power of exchange rate switch into the micro field of transmission mechanism of exchange rate.Therefore, there are three branches the article will further discuss: analyzing the intrinsic relation between the flexibility and insulatingpower of exchange rate in the structure of the Mundell-Fleming- Dornbusch Model; tracing the transmission mechanism of exchange rate in the Representative Agent Model; according to the economic globalization, discussing the problems on the international economic policy coordination with the game theory.Part II Macro-Economic Analysis on the Insulating Power of Exchange RateComparing insulating power between the different exchange rate regimes, mainly between the... |
PDF Full Text Request