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Occasional Interventions to Target Rates


  • Lewis, Karen K


This paper develops a model of central-bank intervention based upon a policy characteristic of foreign-exchange interventions by the United States, Germany, and Japan in the late 1980s and evaluates it empirically. Central bankers intervene with greater intensity as rates deviate from target levels but they also try to stabilize rates around current levels. The model is estimated using exchange rates and data based upon observed central-bank interventions. Interestingly, the estimates of the model are consistent with the predictions of the theoretical model for both the deutsche-mark/dollar rate and, less strongly, for the yen/dollar rate. Copyright 1995 by American Economic Association.

Suggested Citation

  • Lewis, Karen K, 1995. "Occasional Interventions to Target Rates," American Economic Review, American Economic Association, vol. 85(4), pages 691-715, September.
  • Handle: RePEc:aea:aecrev:v:85:y:1995:i:4:p:691-715

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    References listed on IDEAS

    1. Grossman, Gene M & Helpman, Elhanan, 1995. "Trade Wars and Trade Talks," Journal of Political Economy, University of Chicago Press, vol. 103(4), pages 675-708, August.
    2. Grossman, Gene M & Helpman, Elhanan, 1994. "Protection for Sale," American Economic Review, American Economic Association, vol. 84(4), pages 833-850, September.
    3. Anne O. Krueger, 1993. "Free Trade Agreements as Protectionist Devices: Rules of Origin," NBER Working Papers 4352, National Bureau of Economic Research, Inc.
    4. Ken Binmore & Ariel Rubinstein & Asher Wolinsky, 1986. "The Nash Bargaining Solution in Economic Modelling," RAND Journal of Economics, The RAND Corporation, vol. 17(2), pages 176-188, Summer.
    5. Bernheim, B. Douglas & Peleg, Bezalel & Whinston, Michael D., 1987. "Coalition-Proof Nash Equilibria I. Concepts," Journal of Economic Theory, Elsevier, vol. 42(1), pages 1-12, June.
    6. Hirschman,Albert O., 1981. "Essays in Trespassing," Cambridge Books, Cambridge University Press, number 9780521282437, March.
    7. B. Douglas Bernheim & Michael D. Whinston, 1986. "Menu Auctions, Resource Allocation, and Economic Influence," The Quarterly Journal of Economics, Oxford University Press, vol. 101(1), pages 1-31.
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