Optimal currency basket in a world of generalized floating : An application to the Nordic countries
AbstractThe purpose of this paper is to derive optimal weights for a currency basket taking into consideration the objective of the policymaker. We carefully distinguish between the two terms: effective exchange rate index and currency basket, which are often used interchangeably in the literature. In general, our analysis is an extension of the work of Branson-Katseli and Lipschitz-Sundararajan and then applied to the Nordic countries. We use the policy objective of minimizing fluctuation in export production and illustrate our results using Norway, Sweden and Finland. The weights we derive create optimal currency baskets which are different from the ones used in the countries.
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Bibliographic InfoArticle provided by Elsevier in its journal International Journal of Forecasting.
Volume (Year): 3 (1987)
Issue (Month): 1 ()
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Web page: http://www.elsevier.com/locate/ijforecast
Other versions of this item:
- Hali J. Edison & Erling Vardal, 1985. "Optimal currency basket in a world of generalized floating : an application to the nordic countries," International Finance Discussion Papers 266, Board of Governors of the Federal Reserve System (U.S.).
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Branson, William H. & Katseli-Papaefstratiou, Louka T., 1980. "Income instability, terms of trade, and the choice of exchange rate regime," Journal of Development Economics, Elsevier, vol. 7(1), pages 49-69, February.
- Asheim, Geir B., 1984. "Properties of a system of currency baskets," Journal of International Economics, Elsevier, vol. 16(3-4), pages 311-317, May.
- Zhang, Zhichao & Shi, Nan & Zhang, Xiaoli, 2011.
"China’s new exchange rate regime, optimal basket currency and currency diversification,"
BOFIT Discussion Papers
19/2011, Bank of Finland, Institute for Economies in Transition.
- Zhang, Zhichao & Shi, Nan & Zhang, Xiaoli, 2011. "China’s new exchange rate regime, optimal basket currency and currency diversification," MPRA Paper 32642, University Library of Munich, Germany.
- Hovanov, Nikolai V. & Kolari, James W. & Sokolov, Mikhail V., 2004. "Computing currency invariant indices with an application to minimum variance currency baskets," Journal of Economic Dynamics and Control, Elsevier, vol. 28(8), pages 1481-1504, June.
- Lars Hörngren & Anders Vredin, 1989. "Exchange risk premia in a currency basket system," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 125(2), pages 311-325, June.
- Hali J. Edison, 1986. "Is the ECU an optimal currency basket?," International Finance Discussion Papers 282, Board of Governors of the Federal Reserve System (U.S.).
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