The fixed exchange rate policy based on the global financial crisis

Specialeforsvar ved Mads Jakob Eriksen

Titel: The Fixed Exchange Rate Policy based on the Global Financial Crisis

Abstract: In 1982 Denmark pursued a fixed exchange rate regime by pegging the Danish Krone to the D-mark and later in 1999 the Euro. The adoption was a milestone since it ended a long period with devaluations of the Danish Krone. Even though the fixed exchange rate policy has been very successful time changes, and in the light of recent occasions the fixed exchange rate exchange is not as protected as it has been. This paper considers a simple DSGE model with different kind of exchange rate regimes. By introducing a foreign demand shock after domestic goods the model creates a simulation as a contrast to Global Financial Crisis in 2008. The analysis is based on the performance by comparing fixed and floating exchange rate regimes. Multiple empirical studies show that the Danish lack of an independent monetary policy by holding a fixed exchange rate policy is important to understand the poor Danish recovery after 2008

Vejleder:  Søren Hove Ravn, Ø.I.
Censor:    Bodil Olai Hansen, CBS