The Revived Bretton Woods System seen from the Benches - Lessons for Europe from a Three-Asset-Portfolio Model
AbstractThe paper develops a three-asset-portfolio model to analyse consequences of foreign exchange market operations by Asian central banks on the exchange rates between euro, dollar and yen. Both an analytical as well as a graphical solution is presented. It is found that -- contrary to public belief -- the purchase of dollar assets by Asian central banks strengthens the dollar against both euro and yen. A diversification of Asian central bank reserves from dollar into euro would weaken the dollar against both other currencies. Thus, such a diversification would be incompatible with Asian currency pegs. However, it is shown that Asian central banks could alter their relative portfolio composition while keeping the peg intact if they would shift from intervening against the dollar into intervening against the euro.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by EconWPA in its series International Finance with number 0505003.
Length: 20 pages
Date of creation: 05 May 2005
Date of revision:
Note: Type of Document - pdf; pages: 20
Contact details of provider:
Web page: http://22.214.171.124
foreign exchange interventions; exchange rates; revived Bretton-Woods-System;
Find related papers by JEL classification:
- F31 - International Economics - - International Finance - - - Foreign Exchange
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-05-07 (All new papers)
- NEP-IFN-2005-05-07 (International Finance)
- NEP-MON-2005-05-07 (Monetary Economics)
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.:
- Michael P. Dooley & David Folkerts-Landau & Peter Garber, 2003.
"An Essay on the Revived Bretton Woods System,"
NBER Working Papers
9971, National Bureau of Economic Research, Inc.
- Sarno, Lucio & Taylor, Mark P, 2001.
"Official Intervention in the Foreign Exchange Market: Is It Effective, and, If So, How Does It Work?,"
CEPR Discussion Papers
2690, C.E.P.R. Discussion Papers.
- Mark P. Taylor & Lucio Sarno, 2001. "Official Intervention in the Foreign Exchange Market: Is It Effective and, If So, How Does It Work?," Journal of Economic Literature, American Economic Association, vol. 39(3), pages 839-868, September.
- Gandolfo, Giancarlo & Goldberg, Michael D., 2005. "International Finance And Open-Economy Macroeconomics," Macroeconomic Dynamics, Cambridge University Press, vol. 9(02), pages 263-266, April.
- Dominguez, Kathryn M & Frankel, Jeffrey A, 1993. "Does Foreign-Exchange Intervention Matter? The Portfolio Effect," American Economic Review, American Economic Association, vol. 83(5), pages 1356-69, December.
- Michael P. Dooley & David Folkerts-Landau & Peter Garber, 2004. "The Revived Bretton Woods System: The Effects of Periphery Intervention and Reserve Management on Interest Rates & Exchange Rates in Center Countries," NBER Working Papers 10332, National Bureau of Economic Research, Inc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (EconWPA).
If references are entirely missing, you can add them using this form.