Monetary Policy Under Dual Exchange Rates

Robert Cumby ()

No 1424, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper finds that the introduction of dual exchange rates gives the monetary authority greater independence from external constraints than it would otherwise enjoy. The monetary authority is able to influence the level of aggregate demand in the short run and to sterilize the effects of temporary foreign distrubances. In addition, the paper finds that dual rates insulate the domestic economy fully from foreign interest rate changes but do not provide insulation from speculative disturbances.

Date: 1984-08
Note: ITI IFM
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Citations: View citations in EconPapers (6)

Published as Journal of International Money and Finance, vol. 3, no. 2, ppp. 195-208, August 1984.

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