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Monetary policy under dual exchange rates

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Author Info

  • Cumby, Robert E.

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.

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File URL: http://www.sciencedirect.com/science/article/B6V9S-458XKCP-1D/2/cf8bd340e9ace0ea8ad044f53827480f
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Bibliographic Info

Article provided by Elsevier in its journal Journal of International Money and Finance.

Volume (Year): 3 (1984)
Issue (Month): 2 (August)
Pages: 195-208

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Handle: RePEc:eee:jimfin:v:3:y:1984:i:2:p:195-208

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Web page: http://www.elsevier.com/locate/inca/30443

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References

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  1. Cumby, Robert E., 1983. "Trade credit, exchange controls, and monetary independence : Evidence from the United Kingdom," Journal of International Economics, Elsevier, vol. 14(1-2), pages 53-67, February.
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Cited by:
  1. Alan C. Stockman & Alejandro Hernandez D., 1985. "Exchange Controls, Capital Controls, and International Financial Markets," NBER Working Papers 1755, National Bureau of Economic Research, Inc.
  2. Wen-ya Chang & Ching-chong Lai, 1998. "The dynamic unsubstitutability of sterilization operations and neutral-intervention operations under dual exchange rates," Journal of Economics, Springer, vol. 68(3), pages 235-253, October.
  3. Ching-chong Lai, 1990. "Exchange Rate Determination under Flexible and Two-Tier Exchange Rate Regimes," Eastern Economic Journal, Eastern Economic Association, vol. 16(2), pages 115-123, Apr-Jun.

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