Essays on Exchange Rate Target Zones and Stabilization Policies PDF Download

Author: Alejandro M. Werner
Publisher:
ISBN:
Category : Economic stabilization
Languages : en
Pages : 132

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Author: Mr.Lars E. O. Svensson
Publisher: International Monetary Fund
ISBN: 1451979991
Category : Business & Economics
Languages : en
Pages : 52

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Book Description
The trade-off between interest rate variability and the width of an exchange rate target zone is examined, using the regulated Brownian motion model of target zones. The interest rate differential’s asymptotic (unconditional) variability is increasing in the exchange rate band for narrow bands; whereas it is slowly decreasing for wide bands. The interest rate differential’s instantaneous (conditional) variability is decreasing in the exchange rate band. The model is extended to include a realignment/devaluation risk, as well as an endogenous exchange rate risk premium. The risk premium is small for reasonable parameter values.

Author: Yeongseop Rhee
Publisher:
ISBN:
Category :
Languages : en
Pages : 490

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Author: Robert P. Flood
Publisher:
ISBN:
Category : Foreign exchange
Languages : en
Pages : 86

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In the context of a flexible-price monetary exchange rate model and the assumption of uncovered interest parity, we obtain a measure of the fundamental determinant of exchange rates. Daily data for the European Monetary System are used to explore the importance of non-linearities in the relationship between the exchange rates and fundamentals. Many implications of existing "target-zone" exchange rate models are tested; little support is found for existing non-linear models of limited exchange rate flexibility

Author: George S. Alogoskoufis
Publisher:
ISBN:
Category : Economic stabilization
Languages : en
Pages : 44

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Author: Andrew Hughes Hallett
Publisher:
ISBN:
Category : Economics
Languages : en
Pages : 44

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El trabajo plantea si el objetivo de tipo de cambio es un metodo de realzar la efectividad de la politica monetaria y fiscal o si es una parte esencial en la articulacion de una coordinacion efectiva. El analisis se realiza utilizando el modelo MCM de la Reserva Federal. Contiene bibliografia.

Author: William Allen
Publisher: Routledge
ISBN: 1134530145
Category : Business & Economics
Languages : en
Pages : 305

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Maxwell Fry was known internationally for his research into international and domestic financial issues. This book constitutes a tribute to his pioneering work in so many areas, and draws together contributions from a range of academic and policy-making colleagues who were fortunate enough to experience the depth of knowledge and insights which Max

Author: Geert Bekaert
Publisher:
ISBN:
Category : Foreign exchange administration
Languages : en
Pages : 68

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In this paper we develop an empirical model of exchange rates in a target zone. The model is general enough to nest most theoretical and empirical models in the existing literature. We find evidence of two types of jumps in exchange rates. Realignment jumps are those that are associated with the periodic realignments of the target zone and within-the-band jumps are those that can be accommodated within the current target zone. The exchange rate may jump outside the current target zone band, in the case of a realignment, but when no jump occurs the target zone is credible (there is zero probability of a realignment) and the exchange rate must stay within the band. We incorporate jumps, in general, by conditioning the distribution of exchange rate changes on a jump variable where the probability and size of a jump vary over time as a function of financial and macroeconomic variables. With this more general model, we revisit the empirical evidence from the European Monetary System regarding the conditional distribution of exchange rate changes, the credibility of the system, and the size of the foreign exchange risk premia. In contrast to some previous findings, we conclude that the FF/DM rate exhibits considerable non-linearities, realignments are predictable and the credibility of the system did not increase after 1987. Moreover, our model implies that the foreign exchange risk premium becomes large during speculative crises. A comparison with the Deutschemark/Dollar rate suggests that an explicit target zone does have a noticeable effect on the time-series behavior of exchange rates.

Author: Luis Serven Diez
Publisher:
ISBN:
Category :
Languages : en
Pages : 376

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Author: Alain Durré
Publisher: Presses univ. de Louvain
ISBN: 2930344296
Category : Business & Economics
Languages : fr
Pages : 188

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Book Description
Despite the consequences of financial bubbles on economic activity, it is still an open question to what extent the monetary policy should react to sharp fluctuations of equity prices. This dissertation attempts to contribute to the debate with some theoretical and empirical analyses of the relationship between monetary policy and financial markets. Chapter 1 incorporates the effect of real equity prices on aggregate demand in a forward-looking expectations neo-Keynesian model. This effect arises either from a wealth effect or from a change in consumers' confidence. The objective function of monetary authorities depends on the output gap and the deviation of expected inflation from the target. A numerical simulation, based on US data, illustrates the quantitative importance of the financial market channel for various exogenous shocks. In Chapter 2, the variation of equity prices enters explicitly in the loss function of the monetary authorities while, at the same time, it affects aggregate demand. This modifies the optimal monetary policy by increasing the volatility of the nominal interest rate. Chapter 3 examines how the launch of the European single currency has affected expectations on future monetary policy by comparing the econometric results of a co-integrated VAR model on pre- and post- January 1999 data. Chapter 4 deals with diverse methodological issues related to the estimation of the Taylor rule, which represents Central Bank decisions by a single and stable function. Several interesting results emerge from the modelling of the Fed funds rate over the period 1987-2002. In particular, assuming a discontinuous and asymmetric response of the Federal Reserve to fluctuations of equity prices, corrects the apparent instability of the rule.