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Broome, Simon J. (2003) Limited Reserves and the Optimal Width of an Exchange Rate Target zone. UNSPECIFIED. (Unpublished)
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Abstract
This paper analyses the stabilising properties of an exchange rate target zone when the stock of available reserves is limited. In these circumstances it is reasonable to suppose that the optimal bandwidth is affected by the expected lifetime of the zone. Our analysis uses Sutherland's (1995) target zone model to assess the importance of the expected lifetime in determining the optimal width of the zone. We find that the expected lifetime tends to widen the optimal bandwidth considerably but unless the stock of initial reserves is small and/or the fundamentals drift large, the extra lifetime bought is small in percentage terms.
| Item Type: | Other |
|---|---|
| Additional Information: | N122/08/03 |
| Keywords: | Stabilisation policy, exchange rate crises, optimal target zones |
| Academic Unit: | Faculty of Social Sciences > Economics, Finance and Accounting |
| Item ID: | 116 |
| Depositing User: | Ms Sandra Doherty |
| Date Deposited: | 23 Oct 2003 |
| Refereed: | No |
| URI: | https://mural.maynoothuniversity.ie/id/eprint/116 |
| Use Licence: | This item is available under a Creative Commons Attribution Non Commercial Share Alike Licence (CC BY-NC-SA). Details of this licence are available here |
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