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Asymmetric Central Bank Reaction Functions: An Application of Smooth Transition Regression

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Listed:
  • Denny, K.

Abstract

This paper estimates a simple model of exchange rate policy where the Central Bank optimises an objective function which takes into account competitiveness, its commitment to the EMU and the cost of adjustment. We allow for asymmetry in government behaviour whereby a key paremeter, the marginal adjustment cost of the effective exchange rate, takes on a continuum of values depending on the value of the DeutscheMark/Irish pound exchange rate.

Suggested Citation

  • Denny, K., 1999. "Asymmetric Central Bank Reaction Functions: An Application of Smooth Transition Regression," Papers 99/4, College Dublin, Department of Political Economy-.
  • Handle: RePEc:fth:dublec:99/4
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    References listed on IDEAS

    as
    1. Pfann, Gerald A. & Verspagen, Bart, 1989. "The structure of adjustment costs for labour in the Dutch manufacturing sector," Economics Letters, Elsevier, vol. 29(4), pages 365-371.
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    Keywords

    TIME SERIES ; EXCHANGE RATE;

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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