IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Optimal real exchange rate targeting: a stochastic analysis

  • Francesco Menoncin
  • Marco Tronzano

This paper extends the literature on real exchange rate targeting inside a stochastic optimization framework where the real exchange rate displays long run mean reversion while temporarily reflecting a “liquidity effect”. When real exchange rate volatility is constant, an active stabilization rule is welfare increasing with respect to non intervention only beyond a given volatility threshold. Moreover, the welfare gains are larger the lower is the degree of mean reversion. Under a stochastic volatility assumption, the policy maker’s intertemporal discount rate has instead a major influence, and real exchange rate targeting is welfare increasing only if the policymaker is sufficiently farsighted.

If 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.

File URL: http://fausto.eco.unibs.it/~segdse/paper_pdf/pdf0401.pdf
Our checks indicate that this address may not be valid because: 404 Not Found. If this is indeed the case, please notify (Matteo Galizzi)


Download Restriction: no

Paper provided by University of Brescia, Department of Economics in its series Working Papers with number ubs0401.

as
in new window

Length:
Date of creation:
Date of revision:
Handle: RePEc:ubs:wpaper:ubs0401
Contact details of provider: Postal: Via S. Faustino 74/B, 25122 Brescia
Phone: +39-(0)30-2988704
Web page: http://www.unibs.it/atp/page.1019.0.0.0.atp?node=224
More information through EDIRC

No references listed on IDEAS
You can help add them by filling out this form.

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:ubs:wpaper:ubs0401. 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: (Matteo Galizzi)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.