The welfare implications of foreign exchange intervention

Wai-Ming Ho

Journal of International Money and Finance, 2008, vol. 27, issue 8, 1360-1382

Abstract: This paper examines the welfare implications of foreign exchange intervention in a two-country, two-currency, general equilibrium model with limited participation in financial markets and cash-in-advance constraints on transactions. Both sterilized and nonsterilized intervention operations have significant impacts on the allocation of liquidity in international financial markets and therefore affect real economic activities. The welfare effects of shocks to monetary policy, sterilized and nonsterilized foreign exchange interventions are examined and compared. The design of welfare-maximizing intervention policy rules is also discussed.

Keywords: Foreign; exchange; market; Sterilized; and; nonsterilized; interventions; Liquidity; effects; Welfare; analysis (search for similar items in EconPapers)
Date: 2008
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jimfin:v:27:y:2008:i:8:p:1360-1382

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