Exchange Rate Regimes: Middling Through
The appropriate exchange rate regime, in the context of integration of currency markets with financial markets and of large international capital flows, continues to be a policy dilemma. It is found that the majority of countries are moving towards somewhat higher exchange and lower interest rate volatility. Features of foreign exchange (forex) markets could be partly motivating these choices. A model with noise trading, non-traded goods and price rigidities shows that bounds on the volatility of the exchange rate can lower noise trading in forex markets; decrease fundamental variance and improve real fundamentals in an emerging market economy (EME); and give more monetary policy autonomy. Central banks prefer secret interventions where they have an information advantage or fear destabilizing speculation. But in the model discussed in this article, short-term pre-announced interventions can control exchange rate volatility, pre-empt deviations in prices and real exchange rates, and allow markets to help central banks achieve their targets. The long-term crawl need not be announced. In conclusion, the regime's applicability to an EME is explored.
Volume (Year): 35 (2006)
Issue (Month): 2 ()
|Contact details of provider:|| Web page: http://www.tandfonline.com/RGER20|
|Order Information:||Web: http://www.tandfonline.com/pricing/journal/RGER20|
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.:
- Olivier Jeanne & Andrew K. Rose, 2002.
"Noise Trading And Exchange Rate Regimes,"
The Quarterly Journal of Economics,
MIT Press, vol. 117(2), pages 537-569, May.
- Olivier Jeanne & Andrew K Rose, 1999. "Noise trading and exchange rate regimes," Reserve Bank of New Zealand Discussion Paper Series G99/2, Reserve Bank of New Zealand.
- Olivier Jeanne & Andrew K. Rose, 1999. "Noise Trading and Exchange Rate Regimes," NBER Working Papers 7104, National Bureau of Economic Research, Inc.
- Jeanne, Olivier & Rose, Andrew K, 1999. "Noise Trading and Exchange Rate Regimes," CEPR Discussion Papers 2142, C.E.P.R. Discussion Papers.
- Taimur Baig, 2001. "Characterizing Exchange Rate Regimes in Post-Crisis East Asia," IMF Working Papers 01/152, International Monetary Fund.
- Jeffrey A. Frankel & Giampaolo Galli & Alberto Giovannini, 1996. "The Microstructure of Foreign Exchange Markets," NBER Books, National Bureau of Economic Research, Inc, number fran96-1.
- John Williamson, 2000.
"Exchange Rate Regimes for Emerging Markets: Reviving the Intermediate Option,"
Peterson Institute Press: Policy Analyses in International Economics,
Peterson Institute for International Economics, number pa60, 03.
- John Williamson, 2000. "Exchange Rate Regimes for Emerging Markets: Reviving the Intermediate Option," Peterson Institute Press: All Books, Peterson Institute for International Economics, number pa60, May.
- Reinhart, Carmen & Calvo, Guillermo, 2002.
"Fear of floating,"
14000, University Library of Munich, Germany.
- Svensson, Lars E O, 1992.
"Why Exchange Rate Bands? Monetary Independence in Spite of Fixed Exchange Rates,"
CEPR Discussion Papers
742, C.E.P.R. Discussion Papers.
- E.O. Svensson, Lars, 1994. "Why exchange rate bands? : Monetary independence in spite of fixed exchange rates," Journal of Monetary Economics, Elsevier, vol. 33(1), pages 157-199, February.
- Svensson, L.E.O., 1992. "Why Exchange Rate Bands? Monetary Independence in Spite of Fixed Exchange Rates," Papers 521, Stockholm - International Economic Studies.
- Lars E.O. Svensson, 1992. "Why Exchange Rate Bands? Monetary Independence in Spite of Fixed Exchange Rates," NBER Working Papers 4207, National Bureau of Economic Research, Inc.
- Kenneth Rogoff, 1996. "The Purchasing Power Parity Puzzle," Journal of Economic Literature, American Economic Association, vol. 34(2), pages 647-668, June.
- Richard K. Lyons, 2006. "The Microstructure Approach to Exchange Rates," MIT Press Books, The MIT Press, edition 1, volume 1, number 026262205x, June.
- Jeffrey A. Frankel, 1999. "No Single Currency Regime is Right for All Countries or At All Times," NBER Working Papers 7338, National Bureau of Economic Research, Inc.
- Kathryn Dominguez & Jeffrey A. Frankel, 1990. "Does Foreign Exchange Intervention Work?," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 16, May.
When requesting a correction, please mention this item's handle: RePEc:taf:glecrv:v:35:y:2006:i:2:p:153-175. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Michael McNulty)
If references are entirely missing, you can add them using this form.