The Burden of Intervention: Externalities in Multilateral Exchange Rates Arrangements

Marc Flandreau ()
Additional contact information
Marc Flandreau: Sciences Po - Sciences Po, Centre for Finance and Development - GRADUATE INSTITUTE OF INTERNATIONAL AND DEVELOPMENT STUDIES

SciencePo Working papers Main from HAL

Abstract: In this paper, the author considers a multilateral target zone model that generalizes Krugman's model of a bilateral target zone. Parities are defended by manipulating money supplies in participating countries. This means that interventions aimed at one given exchange rate influence other exchange rates as well. As a result of these 'externalities' shocks on each fundamental affect the whole range of exchange rates involved. Moreover, intramarginal interventions arise endogenously, and the exchange rate distribution does not exhibit the u-shaped pattern which is typical of traditional target zones. Instead, his model gives rise to 'intramarginal targets' to which exchange rates tend to return. The location of these targets is shown to depend on the intervention-sterilization mix adopted by monetary authorities

Date: 1998-06
Note: View the original document on HAL open archive server: https://hal-sciencespo.archives-ouvertes.fr/hal-03416385
References: Add references at CitEc
Citations:

Published in Journal of International Economic Law, 1998, 45 (1), pp.137 - 171

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hal:spmain:hal-03416385

Access Statistics for this paper

More papers in SciencePo Working papers Main from HAL
Bibliographic data for series maintained by Contact - Sciences Po Departement of Economics ().