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Monetary Policy Under a Currency Board

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  • Marius Jurgilas

    (University of Connecticut and Elon University)

Abstract

The consensus view is that central banks under currency boards do not have tools for active monetary policy. In this paper, we analyze the foreign exchange fee as a monetary policy instrument that can be used by a central bank under a currency board. We develop a general equilibrium model showing that changes in this fee may have the same effects as a change in the monetary policy stance. Thus central banks under the currency board are shown to have an avenue to implement active monetary policy.

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File URL: http://www.econ.uconn.edu/working/2007-34.pdf
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Bibliographic Info

Paper provided by University of Connecticut, Department of Economics in its series Working papers with number 2007-34.

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Length: 31 pages
Date of creation: Sep 2007
Date of revision:
Handle: RePEc:uct:uconnp:2007-34

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Postal: University of Connecticut 341 Mansfield Road, Unit 1063 Storrs, CT 06269-1063
Phone: (860) 486-4889
Fax: (860) 486-4463
Web page: http://www.econ.uconn.edu/
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Keywords: interbank market; monetary policy; currency board;

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  1. Ambler, Steve & Paquet, Alain, 1997. "Recursive methods for computing equilibria of general equilibrium dynamic Stackelberg games," Economic Modelling, Elsevier, vol. 14(2), pages 155-173, April.
  2. Marius Jurgilas, 2006. "Interbank Markets under Currency Boards," Working papers 2006-19, University of Connecticut, Department of Economics.
  3. Nie, Pu-yan & Chen, Li-hua & Fukushima, Masao, 2006. "Dynamic programming approach to discrete time dynamic feedback Stackelberg games with independent and dependent followers," European Journal of Operational Research, Elsevier, vol. 169(1), pages 310-328, February.
  4. Steve Ambler & Alain Paquet, 1994. "Recursive Methods for Computing Equilibria of General Equilibrium Dynamic Stackelberg Games," Cahiers de recherche CREFE / CREFE Working Papers 25, CREFE, Université du Québec à Montréal.
  5. Marius Jurgilas, 2005. "Interbank market under the currency board: Case of Lithuania," Computing in Economics and Finance 2005 448, Society for Computational Economics.
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