Monetary Policy Under a Currency Board
The consensus view is that central banks under currency boards do not have tools for active monetary policy. In this paper, we analyze the foreign exchange fee as a monetary policy instrument that can be used by a central bank under a currency board. We develop a general equilibrium model showing that changes in this fee may have the same effects as a change in the monetary policy stance. Thus central banks under the currency board are shown to have an avenue to implement active monetary policy.
|Date of creation:||Sep 2007|
|Date of revision:|
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- Marius Jurgilas, 2006. "Interbank Markets under Currency Boards," Working papers 2006-19, University of Connecticut, Department of Economics.
- Marius Jurgilas, 2005. "Interbank market under the currency board: Case of Lithuania," Computing in Economics and Finance 2005 448, Society for Computational Economics.
- Ambler, Steve & Paquet, Alain, 1997.
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Elsevier, vol. 14(2), pages 155-173, April.
- Steve Ambler & Alain Paquet, 1994. "Recursive Methods for Computing Equilibria of General Equilibrium Dynamic Stackelberg Games," Cahiers de recherche CREFE / CREFE Working Papers 25, CREFE, Université du Québec à Montréal.
- Nie, Pu-yan & Chen, Li-hua & Fukushima, Masao, 2006. "Dynamic programming approach to discrete time dynamic feedback Stackelberg games with independent and dependent followers," European Journal of Operational Research, Elsevier, vol. 169(1), pages 310-328, February.
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