Exchange Rate Volatility and Intervention: Implications of the Theory of Optimum Currency Areas
AbstractWe show that the variables pointed to by the theory of optimum currency areas (OCAs) help to explain patterns of exchange rate variability and intervention across countries. But OCA considerations affect exchange market pressures and intervention in different ways. Exchange market pressures mainly reflect asymmetric shocks, while intervention largely reflects the variables that OCA theory suggests cause countries to value stable exchange rates (small size and the extent of trade links). Intervention and exchange market pressure also vary with the structure of the international monetary system.
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Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 1982.
Date of creation: Sep 1998
Date of revision:
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Other versions of this item:
- Bayoumi, Tamim & Eichengreen, Barry, 1998. "Exchange rate volatility and intervention: implications of the theory of optimum currency areas," Journal of International Economics, Elsevier, vol. 45(2), pages 191-209, August.
- F31 - International Economics - - International Finance - - - Foreign Exchange
- F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
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