Exchange Rate Dynamics Under Stochastic Regime Shifts: A Unified Approach

Kenneth Froot and Maurice Obstfeld

No 2835, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Techniques of regulated Brownian motion are used to analyze the behavior of the exchange rate when official policy reaction functions are subject to future stochastic changes. We examine exchange-rate dynamics in alternative cases where the authorities promise (i) to confine a floating rate within a predetermined range and (ii) to peg the currency once it reaches a predetermined future level. Similarities between these and several related examples of regime switching are stressed

Date: 1989-02
Note: ITI IFM
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Citations: View citations in EconPapers (36)

Published as Journal of International Economics, Vol. 31, pp. 203-229, (1991).

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Journal Article: Exchange-rate dynamics under stochastic regime shifts: A unified approach (1991)
Working Paper: Exchange Rate Dynamics Under Stochastic Regime Shifts: A Unified Approach (1991)
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