Asymmetric Central Bank Reaction Functions: An Application of Smooth Transition Regression

Kevin Denny

Working Papers from College Dublin, Department of Political Economy-

Abstract: This paper estimates a simple model of exchange rate policy where the Central Bank optimises an objective function which takes into account competitiveness, its commitment to the EMU and the cost of adjustment. We allow for asymmetry in government behaviour whereby a key paremeter, the marginal adjustment cost of the effective exchange rate, takes on a continuum of values depending on the value of the DeutscheMark/Irish pound exchange rate.

Keywords: TIME SERIES; EXCHANGE RATE (search for similar items in EconPapers)
JEL-codes: C22 F31 F41 (search for similar items in EconPapers)
Pages: 9 pages
Date: 1999
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Persistent link: https://EconPapers.repec.org/RePEc:fth:dublec:99/4

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