Sterilized interventions and capital controls

Nalini Prasad

Journal of International Money and Finance, 2018, vol. 88, issue C, 101-121

Abstract: I incorporate sterilized intervention policies with capital controls into a small open economy model. A central bank can influence an economy’s holdings of foreign bonds through their sterilized interventions, allowing policymakers to affect the terms of trade. I find that policymakers choose foreign bond holdings to take advantage of the market power that a nation has over its terms of trade. Under a floating exchange rate regime, these policies can simultaneously reduce real exchange rate and inflation volatility. I suggest a rationale for sterilized interventions with capital controls; a central bank can improve the international purchasing power of domestic consumers.

Keywords: Small open economy; Sterilization; Capital controls (search for similar items in EconPapers)
JEL-codes: F32 F41 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0261560618304455
Full text for ScienceDirect subscribers only

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:eee:jimfin:v:88:y:2018:i:c:p:101-121

DOI: 10.1016/j.jimonfin.2018.07.004

Access Statistics for this article

Journal of International Money and Finance is currently edited by J. R. Lothian

More articles in Journal of International Money and Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().