The large literature on the optimum intensity of foreign exchange market intervention contains two alternative characterizations of the central bank's policy choice variable: (1) the central bank's intensity of intervention in the foreign exchange mar ket and (2) the Frenkel-Aizenman (1982) index of managed float. J. T. Cuddington (1991) has shown the relation between these policy measur es by deriving the Frenkel-Aizenman index from a standard specification of money market equilibrium. Here, the Frenkel-Aizenman index is generalized to cover situations where both sterilized and unsteriliz ed intervention are possible.
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