How to devalue exchange rates, without building up reserves: Strategic theory for central banking
Central banks, wanting to devalue their currency, often intervene in the foreign exchange market by buying up foreign currency. Such interventions even if effective lead to a build up of foreign exchange reserves. This paper argues that the coupling of devaluation and reserve build up can be avoided if the central bank intervention takes the form of a ‘schedule’, that is, commitment to buying and selling conditional on the exchange rate.
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- Basu, Kaushik & Morita, Hodaka, 2006.
"International credit and welfare: A paradoxical theorem and its policy implications,"
European Economic Review,
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- Basu, Kaushik & Morita, Hodaka, 2005. "International Credit and Welfare: A Paradoxical Theorem and Its Policy Implications," Working Papers 05-04, Cornell University, Center for Analytic Economics.
- Encaoua, David & Jacquemin, Alexis, 1980. "Degree of Monopoly, Indices of Concentration and Threat of Entry," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 21(1), pages 87-105, February.
- Bresnahan, Timothy F, 1981. "Duopoly Models with Consistent Conjectures," American Economic Review, American Economic Association, vol. 71(5), pages 934-945, December. Full references (including those not matched with items on IDEAS)
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