Dual Exchange Markets and Intervention

Pertti Haaparanta

No wp-1986-006, WIDER Working Paper Series from World Institute for Development Economic Research (UNU-WIDER)

Abstract: It is argued that the theoretical literature on dual exchange markets has completely neglected the form of central bank intervention emphasized by the "classics". They advocated neutral intervention where the central bank sells in the capital market all foreign exchange it acquires from the current transactions. Current literature concentrates on the non-sterilized intervention. In a choice-theoretic framework it is shown that the form of intervention matters very much for the transmission of changes in foreign rate of interest and in terms of trade.

Keywords: Central banking; Capital market; Foreign exchange (search for similar items in EconPapers)
Date: 1986
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Citations: View citations in EconPapers (3)

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