Exchange Rate Target Zones in a Utility Maximizing Framework

Elias Belessakos and Rahim Loufir

Annals of Economics and Statistics, 1993, issue 31, 33-50

Abstract: We present a monetary model of unilateral exchange rate target zone based on microeconomic optimization principles. We endogenously derive the consumer's consumption and protfolio choices, and the demand for money balances. The standard monetary model results, like the S-shaped solution for the exchange rate and the transfer of volatility from exchange rates to nominal interest rates are also obtained.

Date: 1993
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Persistent link: https://EconPapers.repec.org/RePEc:adr:anecst:y:1993:i:31:p:33-50

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