Foreign Exchange Intervention For Internal Balance

Kim Kyung Soo

International Economic Journal, 2000, vol. 14, issue 4, 59-75

Abstract: This paper is concerned with the optimal combination of sterilization and wage Indexation in a small open economy subject to various disturbances. In most cases the Effects of these policy instruments are interdependent such that they act like a single Instrument. At the optimum, in addition to the well-known substitutability of foreign Exchange intervention and wage indexation , the complementarity of foreign exchange Intervention and sterilization is obtained. The relationship between the degree of Capital mobility and the optimal combination of the policy instruments is also examined. [E52, F4]

Date: 2000
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DOI: 10.1080/10168730000000035

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